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Have I Figured a Way to Cheat Inflation?

As I was reading some comments on some posts about inflation this morning a thought popped into my head. For the past few years I have been my income taxes by utilizing quarterly withdrawals from one of the inherited accounts from my parents. All of the funds go directly to the IRS, thus I don’t have to make the payments myself. Unfortunately next year this account will run dry.

The other day I was pondering other alternatives to continue paying the tax man. I finally settled on utilizing my pension. This will cover about 75% of my tax liability. It will have to be supplemented by the rest coming out of my IRA . My pension was based on a defined contribution benefit plan. Four years ago I had decided to take the money as pension with a 100% survivorship rather than a lump sum. One of my concerns at the time however was the pension did not include a COLA.

Anyways what popped into my head while reading some comments about inflation is my tax payments are not subject to inflation. Is that correct? Does a dollar paid to the IRS this year have the same value as a dollar paid in the future, as taxes are not a good or service? If so then the purchasing power of my pension will not continually erode over the years. Or is this just another case of me being too anal-yltical which I am often accused of being?

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2 Comments
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Harold Tynes
4 hours ago

The tax brackets are adjusted each year for inflation. Does your income increase based on inflation? Social Security has a COLA. You said your pension does not. Other income? Deductions are inflated, too. Maybe we are both overthinking.

Nick Politakis
4 hours ago

You are overthinking this!

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