Retirement Tax Triangle for Better Retirement Planning
Financial advisors make their bread and butter from retirement planning. Unless you’re wealthy (or young), chances are that most of your money is in your retirement savings and home equity. That makes your retirement accounts the main interest of most financial advisors, so it’s in their best interest to make it sound complicated. Unfortunately, they are right. There are a bunch of little tricks to good retirement planning. Fortunately, most of them are easy to straighten out, like the tax triangle. Retirement Taxes Welcome to Retirement. Oh, while you’re here, we need to tax those 401(k) withdrawals. All too many new retirees find themselves surprised that withdrawals from their 401k accounts are fully taxable. It’s an easy mistake to make. After all, when you contributed money to your 401k it was tax-free (technically, pre-tax, but same difference). And, while all of that money sat in your 401k earning interest and dividends, it was tax-free. So, why wouldn’t it keep being tax-free? Unfortunately, that’s the deal you make with the IRS. A 401k plan is actually a tax-deferred account. As the name implies, the IRS allows you to defer, or wait, to pay the taxes. It is a huge advantage and …