When it comes to retirement, those with higher incomes might not be as prepared for retirement as they would like to think.
It can be concerning that those who are approaching retirement with IRA and 401(k) balances are not aware that their accumulations require taxes to be paid. It may be difficult to accept that the money that one has worked so hard for in an account that they have contributed to throughout their working years does not all belong to them.
There have been definite benefits throughout the years of not being mandated to pay taxes on contributions paid into IRA and 401(k) plan accounts and on investment returns on the same contributions. A little calculation reveals that deferring taxes for a long time can have real, true value. The benefit is equal to exempting taxation from investment returns on plan assets. So even after paid taxes on withdrawals, one is still ahead.
The issue isn’t whether or not the tax treatment accorded is a good deal. It really is, especially for high-income people who benefit the most. The concern comes in for people with moderate and higher incomes who haven’t assessed how well prepared they are for retirement.
The key point of this discussion is to remind those of us who are aware of the benefits of retirement savings and to alert those who are unaware. In fact, if you are unsure of how well-prepared you may be for retirement, or if you have money saved up in a plan like a 401K IRA, then it is highly advised to start acting now. A qualified financial advisor can help provide guidance and possibly even help you answer questions that you haven’t even thought of yet.