A family making 3 times the median income (about $300,000) today pays at most 24% of taxable income in federal tax. The last time the federal debt was in check, their marginal rate would have been well over 40%.

If tax increases are likely over the next 10-20 years, what should you do?

Here is a list of steps you can take. Some of these steps will increase your tax bill the year you do it. But if tax rates increase, the steps could well result in a lower lifetime tax bill.

• Save into a Roth account in your 401k, instead of a traditional pre-tax account. You lose the upfront tax deferral, but the money in the Roth 401k account will never be subject to tax – for you or your heirs. Unlike a Roth IRA, there are no income limits on contributions to a Roth 401(k).
• Convert money in your pretax retirement account into a Roth account. The entire amount converted creates a tax bill. But the money and growth on it are never taxed again. This strategy is super-charged if you convert when the stock market has fallen.
• To reduce the risk of owing estate tax when you pass away, give as much as you can afford to your kids. In 2026, you can give anyone $19,000 with no impact on estate tax due at your death. If you are married, multiply by two. You may not be worried about estate tax given that, currently, only people with an estate over $15 million owe estate tax. But if we had included the estate tax exemption on the chart above, you would have seen how much it has risen – suggesting to us it could go down in the future, making many more people subject to estate tax.
• If you are deferring taxes on appreciated investments, consider creating some gain today. Capital gain tax rates have fallen over time as well. If you have a stock you’re planning on selling in the future, it may make sense to sell and reset your cost basis while rates are 15% or 20%, depending on your current bracket. This is especially attractive if the cost basis step-up at death is eliminated.

Keep in mind that everyone’s situation is different. If your taxable income in retirement will be far lower than it is now, perhaps accelerating income (and a tax bill) won’t make sense, even if tax rates rise. But if you are in the 22% or 24% brackets – married couples with taxable ordinary income of roughly $100,000 to $400,000 -- your tax rate in your 70s and 80s could certainly be higher, especially with large required annual retirement account distributions. If you are a very high earner, your income may decline somewhat in the future, but you will likely continue generating substantial investment income — and history suggests that the highest earners are often the first to see tax rates rise, just as they have benefited most from rate reductions over the past 60 years.

We don’t have a crystal ball. But hedging your bets by paying some extra tax now to avoid it later is worth considering seriously.

US Debt/GDP ratio via St. Louis Fed for years 1966-2024, Congressional budget Office for years 1913-1965

Historical income tax rates via the Tax Foundation

Historical standard deductions via the Tax Policy Center and National Bureau of Economic Research

Historical income data via the St. Louis Fed for years 1953-2024 and “Income Inequality in the United States, 1913–1998” by Thomas Piketty and Emmanual Saez, Quarterly Journal of Economics February 2003 for years 1913-1952