People often think that by deferring their taxes, they will have more money later in life… NOT TRUE! You will pay more tax by deferring, than by just paying as-you-go.
Here is evidence of this fact:
When you start withdrawing retirement income from your tax-deferred account, you will pay more tax than when you were working — that’s because people reaching retirement age have a lot less deductions. Mortgages have often been paid off and children are grown and hopefully out of the house. If they are not gone, but still at home, no tax benefit is available.
How much tax will you pay at retirement? You need money to live on during retirement. Therefore, you start taking money from your IRA and it is this income that forces your Social Security benefits to be included for income tax purposes. You will have to pay an additional $5,000 to $6,000 in taxes because of the deferred account money. Add this $5,000 to your other taxes and I think you will find you will be paying much more tax at retirement, than you ever paid while working and earning money. This as a disaster and a big surprise.
You didn’t see this disaster coming. I know that. But that’s why I’m writing this now — you are being forewarned. You have an Uncle Sam that has grown bigger than any other time in the history of the world, and he wants your money. Uncle Sam has laid out a plan so you think you have money as you read your annual report, but can’t get at it until after you die and have paid the maximum tax. Your name and total account values are printed right on the top of the page. This may be an ACCURATE NUMBER, but try getting this money today. Call the plan administrator and ask how much money can you get today, after you pay the taxes and early withdrawal penalties? The answer to this question will tell you what your real number should be at the top of the report, and one not likely to be too much bigger at retirement, thanks to increased taxes. Now ask yourself how great you feel about your retirement options?
Using this lower number, calculate how long it will last at retirement by withdrawing your necessary expenses annually and see when you will be out of money and become totally dependent on Social Security. I wager it will be seven years or less. This seven-year mark in time is a disaster! You run the numbers and see for yourself how deferring your taxes has given you a false sense of security. Get sick to your stomach and then stop depositing money into this tax-deferred account!
So all this begs the question, “then where does a person place retirement savings for the best growth, safety, and fewest taxes? Answer: A properly structured whole life insurance policy. Email me your information regarding your tax-deferred account and I will prepare a side-by-side comparison and prove to you that you will have double the amount of money than by “deferring your taxes” in a 401(k) or IRA. You will be happy you did: email@example.com
Why Deferring Taxes on Retirement Funds Costs More than Just Paying as You Go…
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