One of the most important considerations when it comes to the retirement planning is an issue of taxes in retirement. In general, most people would be paying either higher or lower taxes than they currently do, and, depending on which group you belong to, the financial moves are different. In either case, considering the levels of national debt, it is expected that the tax rates will be increasing across the board. This is an important implication for retirees, since most of retirement savings are growing tax free, until the point of distribution.
Key Takeaways:
- Since your 401{k} is deferred but not exempt from taxes it will be taxed eventually at whatever rate is current at the time.
- Because our national debt and deficit rates are teetering, the tax rate that a currently deferred 401{k} gets at maturity could greatly exceed expectations.
- Roth IRAs or permanent life insurance are two options that can allow your money to grow free of tax woes in the future.
“I’m referring to the tax debt building up in your individual retirement account, 401(k) or other retirement savings plans. And, as I wrote in my newest book, “The New Retirement Savings Time Bomb,” it can quickly deplete the very savings you were relying on for your retirement years. But there are a few ways you can avoid this problem.”
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