Concerns About Retirement Savings
Have you managed to save at least $200,000 through your IRA and 401(k)? Do you count on that to support you in retirement? If you’ve ever questioned whether that’s enough, you’re certainly not the only one.
A recent study from Allianz Life found that 64% of Americans fear running out of money more than they fear death itself. That’s about two out of three people—friends, family, even maybe yourself. It’s understandable. Nobody wants to be in their 80s, with plenty of life left to live, yet broke.
The negative side is that if you make certain errors with your IRA or 401(k), those fears might actually come true, and you might deplete your savings.
On the brighter side, there’s a new report titled “3 IRA and 401K Mistakes That Can Cost You,” which might help you sidestep these costly errors. Interestingly, you can access this report for free from Utah Boss Retirement Solutions.
We spoke to retirement experts Ryan and Tyson Thacker from Boss Retirement Solutions to find out how this free report can assist you with your IRA or 401(k) as you approach retirement.
– Ryan Thacker, Boss Retirement Solutions
Saving for retirement with an IRA or 401(k) seems straightforward. However, figuring out how to withdraw these funds in retirement can get complicated, and it often feels like there’s an unexpected pitfall awaiting you.
Traditional IRAs and 401(k)s come with tax advantages. By contributing a portion of your salary to these accounts, you defer taxes on that income and on investment growth. But many don’t realize that Uncle Sam is waiting to collect that money eventually. When you retire and begin to withdraw funds, you’ll be taxed on the total amount, including all gains accrued. If you aren’t careful, those taxes could be much larger than you anticipate.
However, here’s some better news: you have more control over your taxes during retirement than at any other time. Making informed decisions here can potentially save you tens or even hundreds of thousands in taxes.
– Tyson Thacker, Boss Retirement Solutions
Unfortunately, many retirees unwittingly become victims of a “tax time bomb” because they’ve followed the conventional advice of the tax preparation industry.
Typically, tax preparers focus on minimizing taxes for the current year, which often leads to maximizing contributions to tax-deferred retirement accounts like IRAs and 401(k)s. But deferring taxes doesn’t eliminate them; it just postpones them. You’ll pay taxes not only on your contributions but also on any growth since day one. Upon withdrawing those funds, the IRS sees it all as ordinary income.
For many diligent savers, these withdrawals can push them into the highest tax brackets, leading to massive tax bills. Additionally, when Required Minimum Distributions (RMDs) kick in at age 73, things can get even trickier.
This “tax time bomb” situation might also affect up to 85% of Social Security benefits and could even double your Medicare premiums. It’s a bit frustrating, right? Following the best practices should not lead to such complications. Fortunately, there are steps you can take.
– Ryan Thacker, Boss Retirement Solutions
When clients meet with advisors at Boss Retirement Solutions, they often uncover common mistakes regarding IRAs and 401(k)s that lead to overpaying taxes. By knowing these errors beforehand, you can possibly protect a fair amount of your savings.
In some situations, it might even make sense to withdraw everything from your tax-deferred accounts. Consider converting some or all of your savings into a tax-free Roth account from your IRA or 401(k). While you will owe taxes on the conversion amount, a knowledgeable tax planner can help you minimize that burden. After converting, the money will grow tax-free.
“For many, switching from a traditional IRA or 401(k) to a Roth can be a significant tax-saving strategy come retirement.”
– Tyson Thacker, Boss Retirement Solutions
No one wants to overpay taxes in retirement. However, specific IRA or 401(k) mistakes can pile up, resulting in six-figure tax bills over 20 or 30 years. The key to avoiding these issues is first to learn what they are and then adopt a solid retirement tax strategy.
To dive deeper into these mistakes and strategies, Boss Retirement Solutions is offering a free report to Utah residents titled “3 IRA and 401K Mistakes.” This report details common but costly errors and how to sidestep them, ultimately maximizing your savings as you prepare for retirement.
