No one likes cold water thrown in their face. However, if your primary retirement savings vehicle has been your 401(k), you may be in for some of that.
When it comes to your savings strategy, ask yourself: have you chosen to pay tax on the seed, or tax on the harvest?
What do we mean? Well, if you are arriving at retirement with the bulk of your savings in a 401(k), then you have chosen to defer taxes on the seed, electing to pay tax on the harvest. That has provided you with one obvious benefit—lower taxes along the way—but it also means that your account values aren’t as great as they look on paper. A portion of your 401(k) belongs to the government, and they are excited for you to retire.
Many people believed that, in retirement, they would be in a lower income tax bracket only to discover their choices along the way prevent that.
And the scary part is, with our nation’s debt exploding, many believe that tax rates in the future are likely to be higher than they are today.
So, what can you do to enjoy more freedom from taxes? PLAN AHEAD.
Your savings strategy today impacts how much of your account you get to keep and spend in retirement.
At Goostree Financial Group we can help. We have been helping people plan for this very question for decades.