Sunday, 17 February 2019
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Have You Overlooked This Area Of Your Retirement? – Forbes

Everyone has a different opinion of what retirement is or isn’t. Some people want to travel the world and lie on a beach, while others may want to stay home and look after the grandkids. No matter what retirement means for you, everyone wants their retirement to be successful. But, what does it take to create a successful retirement? Since everyone’s situation is different, everyone’s needs must be different as well. Some people may care more about protecting their assets; others may care more about guaranteed income; and still others may care more about what they pass on to their loved ones. While these are all great attributes to have, they may not be the most important things to consider when putting together your retirement plan.

One of the most important aspects to plan for in retirement is taxes.

One of the most important aspects to plan for in retirement is taxes. Getty Images

One of the most important aspects to plan for in retirement is taxes. How important are taxes when it comes to the success of your retirement plan? Taxes can have a huge impact if they’re not properly planned for in your retirement years. Can you guess what the highest marginal tax rate has been in our country? Was it 45%? What about 65%? What if I told you it was higher than 85%? Would you believe me? It’s true: In 1944-1945, our highest federal tax rate was 94%, and from 1936-1980, our highest tax rate was never below 70%. For 13 years straight (1951-1963), the tax rate was above 90%.1

In the U.S., most retirement funds have been saved in some type of tax-deferred account, such as an IRA or 401(k).2 Most people are under the belief that IRA stands for individual retirement account.3 When you contribute your hard-earned money to an IRA, you are actually contributing funds to an individual retirement arrangement. Here’s a link to the IRS’ publication 590-A for IRAs: www.irs.gov/pub/irs-pdf/p590a.pdf. When you contribute to a traditional IRA, 401(k), or other type of qualified retirement plan, you are actually entering into an arrangement with the IRS. You are essentially betting on the fact that your taxes will be lower when you retire in the future. Keep in mind that when you make a tax-deductible contribution today into your IRA or 401(k), you are not “saving” taxes; you are simply deferring taxes to some point in the future. You are betting your future retirement success and income on the hope that you will be paying lower taxes in the future.

When it comes to taxes, there is one major rule to remember: You can pay the IRS now, or you can pay the IRS later. Either way, you’ll have to pay your share of taxes. Ask yourself this question: Do I believe taxes will be higher in the future? If your answer is yes, then you may want to rethink why you are putting money into a plan that is designed to delay your taxes. So, when planning your retirement, remember to also plan for when you want to pay Uncle Sam: now or later?

You may be asking yourself: Why is this so important to the future of my retirement, and how will it affect me when I retire? The simple reason is that our nation’s debt continues to climb. (As of the writing of this article in January 2019, our debt is at $21.924 trillion.)4 As it continues upward, this factor may decide where taxes go from here. We are currently in a very low tax environment, so now may be the time to pay those retirement tax dollars, rather than waiting for the unknown to happen.

Roth IRAs and certain types of permanent life insurance can offer more tax-efficient methods of retirement savings as an alternative to the traditional IRA and 401(k). Remember: Unlike IRAs, if you have a Roth IRA, you are also able to contribute to it beyond the age of 70½ if you have earned income. And the best part is that, with the Roth IRA, you are not required to take mandatory distributions beginning at age 70½, unlike a traditional IRA. Certain types of permanent life insurance can offer tax-deferred saving strategies, as well as living benefits, if structured properly.

So, remember: When planning your retirement, it may be worth considering paying your taxes now instead of waiting until you retire. How will you decide? Sit down with an advisor who focuses on tax-saving strategies to help maximize your retirement dollars; they will be able to help you navigate through all the noise out there in regard to what makes a successful retirement for you and your family for years to come.

This content was brought to you by Impact PartnersVoice. Gemlife Financial does not offer tax or legal advice and is not endorsed by, or affiliated with, the Social Security Administration or any other governmental agency. Please consult your tax professional or legal advisor for further guidance. Investment advisory services offered by Stephen Ting through Foundations Investment Advisors, LLC. Insurance and annuities offered through Gary Ybarra, CA insurance license #0G48781. DT006326-0120 

Source: https://www.forbes.com/sites/impactpartners/2019/01/28/have-you-overlooked-this-area-of-your-retirement/

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