Estimated duration: 5-6 minutes
How much did you save on your IRA or 401K? These deferred tax accounts may be some of your biggest retirement assets.
Most people don’t realize it, but donating money to these accounts is easy. However, things get complicated if you want to withdraw this money when you retire.
This is where you can make serious financial mistakes that can cause you to lose huge amounts of your hard-earned savings unnecessarily. Here are three easy ways to maximize your deferred tax account for…
1. Leverage tax planning (and soon)
It’s natural to think of your IRA and 401K money as your money. However, this is actually a joint account between you and the IRS. Remember, when you withdraw this money when you retire, you still have to pay taxes.
And you may end up paying more taxes into these accounts than you think, leaving you with less money than you thought you had.
To make matters worse, the Biden administration recently $4.7 trillion tax increaseAmong these proposed tax increases are a new wealth tax, higher personal income and capital gains taxes, and higher corporate taxes.
It is too early to tell which tax increases will be implemented. But many economists and tax experts believe tax increases are just around the corner. These tax increases will not only affect the wealthy. Every hardworking American will probably pay the price. And if you’ve recently retired or are approaching retirement, the timing isn’t bad.
But there is some good news. You actually have more control over the taxes you pay with your IRA and 401K than you know. And if you take advantage of some simple retirement tax planning strategies now, you can save a small fortune when you retire.
2. Reduce risk by updating and rebalancing your portfolio
When was the last time you renewed and rebalanced your IRA and 401K investments? It took years for many. When BOSS Advisors meet new clients for the first time, over 95% of people are taking more risks than they know or need at this stage of the game.
Here’s why: When there are wild swings in the stock market (as we’ve seen in the last few years), investments can be heavily skewed. This can lead to investments being too aggressive or too conservative. Neither of these scenarios are good.
Risk comes from not knowing what you are doing.
– Warren Buffett
The closer you get to retirement, the harder it will be to recover from big losses in the stock market. This is because the asset may not have time to fully recover before a withdrawal from the investment is required.
Therefore, it is important that your investment portfolio reflects your appetite for risk.
One of the most effective ways to reduce risk is to continually update and recalibrate your investment portfolio. This should be done every 6-12 months or when there is a major change in the stock market or when you experience a major life event.
3. Plan ahead for minimal distribution
The money you save on your IRA and 401K is subject to the required minimum distribution (RMD).
At age 73, the government forces you to withdraw a percentage of your savings from these accounts each year. And this must continue until you die or the money in these accounts is completely depleted.
This happens whether the stock market is rising or falling, whether you need the money or not.
It may not seem like a big deal on the surface, but it is. Taking RMD during a stock market downturn is especially painful as it can force you to sell your investment at a loss.And you will never get this money back.
This is just one of many potential trapdoors using RMD. That’s why you should start planning for withdrawals long before your early 70s. Because the sooner you start, the more options you have.
All of these strategies are effective tools for maximizing your IRA or 401K, but there is one strategy we swear by. And that is to reduce taxes in retirement.
that’s why we created BOSS Retirement Bill CalculatorThis simple yet powerful tool shows you exactly how much tax you owe when you retire and how much you can save.
Just answer a few simple questions and our innovative technology will generate a free report that reveals exactly how much you can save on your IRA and 401K, Social Security benefits, investment income and more.
This tool is free and only takes a few minutes.
Click to learn how much tax you can save when you retire here.
Given the state of our economy and record national debt, the opportunity to take advantage of some tax planning strategies may soon be closed.
Tyson Thacker and Ryan Thacker are co-founders of BOSS Retirement Solutions in Salt Lake City and have won Utah’s Best of State Award five times.
Advisory services provided through BOSS Retirement Advisors, an SEC-registered investment advisory firm. Insurance products and services offered through BOSS Retirement Solutions. The information contained in this material is provided for informational purposes only and the statements contained herein do not constitute tax, legal or investment advice. This information is not intended to be used as the sole basis for making financial decisions and should not be construed as advice designed to meet the specific needs of your individual situation. Please consult an independent attorney or tax advisor for tax matters. Our company is not affiliated with the US government or any government agency.