Is Your Retirement Portfolio a Tax Bomb?

Conventional wisdom suggests you should save everything you can in tax-deferred retirement accounts to minimize taxes in the current year and benefit from tax-sheltered growth. For many, that may still be good advice. Certainly, you should be saving everything you can for retirement. However, for high earners who save a lot, saving in tax-deferred accounts may prove to be bad advice. Why?


This article is part one of a seven-part series. Today’s article provides an overview of the issues and potential solutions.


Snowballing Required Minimum Distributions

Tax-deferred savings have an associated tax liability that you will have to pay someday. The IRS will only let you avoid taxes for so long. Withdrawals from tax-deferred accounts are taxed as ordinary income. You may take withdrawals without penalty from tax-deferred accounts starting at age 59½, but many investors wait to make withdrawals until they are required to take required minimum distributions (RMDs) at age 72.


https://www.kiplinger.com/retirement/retirement-planning/605109/is-your-retirement-portfolio-a-tax-bomb?utm_source=SmartBrief&utm_medium=email&utm_campaign=243E84A8-CF5C-4D54-8046-FA0F97552340&utm_content=700ACBCB-9BAB-4BDA-B28A-664B1CE6C084&utm_term=08e1be75-254e-40bc-a26a-c5d0160cc938

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