I often write about what I learned the prior year. This year I will skip a list and focus on one particular piece of advice. Don’t adjust your financial affairs based on policy proposals.
Do you remember how many major tax policy changes were discussed in 2021? There was talk of not only eliminating the step-up in cost basis but taxing unrealized appreciation at death. There was talk of reducing the estate tax exemption. There was talk of a surtax on incomes over $5 million. There was talk of forgiving as much as $50,000 of student loan debt.
How many of those things happened? Zero! None of it has happened. Some may still occur this year, but nothing major is expected. This brings me to my point. Don’t adjust your financial plans because you think proposed policy changes are a certainty.
If you took out student debt you didn’t need because you hoped it would be forgiven, you’re still waiting. If you sold a business early because you didn’t want to pay a higher tax rate, you missed out on another year of economic growth.
News organizations and political parties have incentives to scare you (or excite you) with big changes. Most of it is just talk. You should listen to the dialogue, but don’t assume it’s all going to happen.
Rest assured, when major changes happen, I’m here to help you sort through how you should adjust. Until then…don’t worry too much. 90% of what we worry about never occurs.