Plan Ahead for Taxes
Though many Americans will have a lower tax rate during retirement, this isn’t always the case. For example, don’t forget that withdrawals from IRAs and 401(k)s are taxable. Then there are required minimum distributions that you have to worry about. Once you turn 72, these start kicking in and you’ll be immediately boosted to a higher tax bracket. As such, your Social Security will also become taxable.
If you haven’t already, look into a Roth IRA or a Roth 401(k) plan. Since these are funded with after-tax dollars, your withdrawals will be tax-free. These should help balance your finances out so that come retirement, you won’t have any nasty surprises from Uncle Sam.
Talk to a financial advisor about how best to balance your budget, how you’ll spend your money during retirement, and how much you should set aside in Roth accounts before it’s too late!
