9159 / What are some of the risks that members of the armed services should be aware of when planning for retirement?
The National Debt and Taxes
Having reviewed the main retirement income benefits available to retirees of the armed services – defined benefit pension plan with a survivor benefit option, service-related disability benefits, and the Thrift Savings Plan – it follows that an analysis of risks to that income receive some consideration. The first risk to consider is the role of federal income tax.
Since the inception of a federal income tax, the highest marginal rates have historically ranged from 94 percent to 28 percent, while effective tax rates have ranged from 82 percent to 18.6 percent.1 The Tax Cuts and Jobs Act (TCJA) of 2017 reduced the top marginal tax bracket to 37 percent and raised the income limits that put individual and married taxpayers in that bracket. The standard deduction was doubled for taxpayers as well. The TCJA is scheduled to sunset on December 31, 2025, and the federal income tax rates in place and standard deductions prior to the enactment of the TCJA will resume.2 Additionally, the TCJA could be repealed prior to its sunset based on changes in political control.