401(k) retirement plans come with considerable tax advantages in the present, but taxes have to be paid when the money is withdrawn. With a high national debt and aging baby boomers straining Social Security, it’s not unlikely that US taxes may rise in the future. So what can you do? If you move retirement money from a traditional IRA or 401(k) to a Roth IRA, you’ll pay at current tax rates rather than future rates. Also possible is a complex strategy involving taking tax-free loans from a cash value life insurance policy. Whatever method you choose, don’t ignore the ticking time bomb of tax-deferred accounts.
- Advice you’ve been getting about saving for retirement is most likely costing you money later on in your life.
- While it may feel like taxes are high now, they could go even higher by the time you retire.
- The time to act is now and by incorporating some tax strategies you could get yourself a tax rate of zero percent.
“But what they didn’t tell you then (because they probably didn’t know) is that as you kept stuffing money into that tax-deferred account, you were chaining yourself to a ticking tax time bomb.”