The Time to Plan Is Now

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Every financial decision ought to be taken with a wary eye toward the future. New college grads ought to think twice about taking a job offering low current but high future wages. Those future wages may not materialize and may be taxed to death. Middle-age and middle-class workers should consider contributing to Roth rather than conventional IRAs. The conventional IRA lowers your current taxes but raises your future taxes, including taxes on your future Social Security benefits. New retirees should consider cashing out their 401(k)s early and delaying receipt of Social Security. That dramatically raises Social Security benefits and lowers the taxes on those benefits.

No approach to financial planning is perfect, but consumption smoothing, done properly, can prepare you for our less than rosy fiscal future.

Laurence J. Kotlikoff is a professor of economics at Boston University and co-author of the book The Coming Generational Storm