In a recent article published by USA Today, they stated there is one thing you can do to make your retirement savings last longer. Their answer: establish an emergency fund. Sure, it's always a good idea to have an emergency fund but you have to make sure that you have saved properly for retirement for that emergency fund to protect you.
So, that one thing is predicated on many other things happening. Charles Schwab was recently asked what one thing people can do to prepare for retirement. His answer: save in your 401(k) or IRA. Again, that one act of saving is important but there are many other things that you need to do when it comes to making sure that retirement savings lasts your entire life.
So, many experts are saying there is one thing to do to have the retirement you want. In reality, there are so many things that you need to do. The challenge with the traditional advice that Americans have received for decades is that requires the saver to compromise on their retirement.
What are those compromises?
- Save your money tax-deferred [which lowers your taxable income the year you earn it] and then pay taxes when you take the money out. That does not seem like a bad deal but the reality is that most people are in higher tax brackets when they retire compared to earlier in life. You know what your taxes are currently, but what are the taxes going to be when you retire? Likely they will be higher which would result in less income for you.
- You can't access your money until 59.5 years old. It's your money but you can't get to it without paying a penalty.
- You have to take your money by age 70.5. These are called Required Minimum Distributions. Why? Because the IRS gave you a tax break when you saved the money and they want the taxes on that money to be paid when you get older.
- You have a partner in retirement. The IRS.
- When you look at your 401(k) or IRA statement balance, that total amount is not all yours. A portion of that goes to the IRS.
- You have to ride the market up and down.
I don't know about you but when it comes to my retirement I really don't want to compromise. The savings strategies that people started following 40 years ago are not the most effective retirement tools to use anymore. Advice over the decades is the same advice that my grandfather followed to retire. But things are not the same as when he was working and saving.
There are not as many companies matching contributions, there are very few pensions left, employers are putting the responsibility of the employee to fund their retirement [which my grandfather's company did a large portion of this for him] and his checking account earned 18%. Today is very different.
With changing times means that the way we save for retirement should change as well. I bet a large number of people reading this post are reading it on their smart phone. As advancements are made in technology, we change with the times. Saving for retirement is no different.
You have the ability to change the way you retire and use new financial technology [actually it is not that new but very few people know about it even though it has been IRS tax law for over 30 years] to stop compromising on your retirement.
If you are retiring using 401(k)s or IRAs, you are going to have to pay taxes, no matter what. That is what you agreed to when you decided to use that as a savings retirement vehicle.
The good news is that there is a large portion of those taxes that are optional. When I say a large portion, I mean hundreds of thousands of dollars of optional taxes.
Here is what we think not compromising in retirement means...
- Savings hundreds of thousands of dollars in taxes in retirement.
- Increasing income in retirement.
- Taking market risk off the table.
We recently helped someone reduce their taxes in retirement by nearly $250,000. What would an additional $250,000 in retirement do for your future?
If compromising on retirement is something you want to stop doing, let us know. We can show you exactly how you can have the retirement YOU want.
ABOUT THE AUTHOR: Cory Carlton is the CEO & Co-Founder of Both Hands Financial Group and for most of his career he has been helping people plan for retirement using IRS tax law to help reduce taxes, increase income, and not worry about the market. The planning the Cory and the agents at Both Hands FG takes into account what a person's needs are now and helps them pay as little tax in the future in retirement and avoid possible stealth taxes that the IRS will find to impose on Americans in the future, because the are already doing this. Cory enjoys woodworking and spending time with his wife, Emily, and daughters, Harper and Scarlett.