You've likely heard or read for years that you should be contributing as much as possible to your retirement plan (401(k), IRA's, SEP), because of the immediate tax deduction and the tax deferred growth. And, you normally don't pay taxes on these accounts until you withdraw the money in retirement. It's all good, right?
Well, consider the following IRA example :
Assume 30 years until retirement and you contribute $4,000 into the IRA each of those years.
Assume a 28% tax bracket - giving you a $1,120 TAX SAVINGS each year. At the end of 30 years you will have saved $33,600 in income taxes.
Let's also assume you have invested very wisely and that your account over 30 years has grown to one million dollars ($1,000,000)! Now let's assume you want to begin withdrawing 10%($100,000). from your IRA each year for income.
ARE YOU PAYING ATTENTION? THIS SHOULD BE A WAKE-UP CALL!
Assuming you are still in the 28% tax bracket, you would pay $28,000 in taxes the first year!
Now, ask yourself....are you creating a retirement plan for yourself or for Uncle Sam?
There just may be another solution. You talk....I'll listen......We'll Plan Together!