Financial planners are urging clients to prepare for potential disruptions to retirement and estate plans as key provisions of the 2017 Tax Cuts and Jobs Act are set to expire at the end of 2025.
According to a new survey from CFP Board, nearly 90 percent of financial professionals believe the changes could pose significant risks to clients’ long-term financial goals.
Retirement income and legacy planning are the top concerns, with 57 percent and 53 percent of respondents, respectively, identifying them as the most vulnerable areas. Other financial planning objectives at risk include charitable giving strategies (18 percent), business succession planning (16 percent) and real estate investments (8 percent).
“We’re at a tipping point that will define the financial future for millions of Americans,” Kevin Keller, CEO of CFP Board, said in a statement revealing the results. “The risks are real, and time is running out.”
The question of extending the 2017 TCJA has been somewhat of a political football, with Republicans claiming the provisions as they stand are a windfall for low- and middle-income Americans while Democrats contend it only benefits the wealthiest households.
One thing is clear: it's a debate with trillions of dollars at stake, representing a potentially substantial windfall for tax collectors at the expense of one non-trivial chunk of the population.
To help clients navigate the upcoming tax landscape, financial planners are recommending a range of strategies. The most commonly counseled approaches include Roth conversions (64 percent) – described by MarketWatch as "buying the dip" for retirement – dialing up retirement plan contributions (64 percent), and tax-loss harvesting (61 percent). These strategies aim to address top client concerns, such as retirement account taxation (61 percent), exposure to current income tax rates (59 percent), and the impact of potential tax rate increases (55 percent).
Advisors are also focused on timing capital gains strategically (78 percent) and using tax-efficient withdrawal strategies for retirement income (75 percent). Additionally, 71 percent of financial professionals are prioritizing tax-deferred accounts to mitigate the impact of the expiring TCJA provisions.
With 95 percent of CFP professionals considering tax planning a critical component of financial strategy, many are emphasizing the importance of prompt planning.
The survey also highlights broader concerns about access to financial planning, with many advisors pointing out how tax policy changes might have made professional guidance less accessible. The TCJA eliminated tax deductions for financial advice, a move that 52 percent of survey respondents say has negatively impacted consumer access to planning services.
To address this, financial professionals are advocating for policy changes, with 46 percent supporting the introduction of an above-the-line tax deduction for financial advice and 39 percent favoring a tax credit system. These measures, they argue, could help more Americans afford professional financial guidance at a critical time.
That was the policy wrinkle a coalition composed of CFP Board, the Financial Planning Association, the National Association of Personal Financial Advisors, and other groups called out in September in a letter addressed to the House Committee on Ways and Means, maintaining that "any tax incentives [for financial advice] should be widely-available to American households."
“As we approach the expiration of TCJA later this year, restoring and expanding tax incentives for financial advice could help ensure that more Americans have access to the professional expertise they need to navigate these significant changes and build the future they envision,” said Erin Koeppel, managing director of government relations and public policy counsel at the CFP Board.
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