Are you 6th in line to receive your retirement savings?
When your advisor told you there would be five people in front of you, taking from your retirement savings before you got yours, how did that make you feel?
Well, if you’re saving in a tax deferred compensation plan like a 401K, 403B, etc. here’s how the line stacks up.
1st… Your broker
2nd…Is Uncle Sam
3rd…Your state and local governments
6th…Finally, You Get What’s Left!
Most of us don’t pay attention to the annual brokerage fees taken from our accounts. Typically they’ll range from 1% - 3%, sometimes more. Doesn’t sound like much, but over a 30+ year working career, that amounts to 30%, or more. What’s worse, you’re paying fees on Uncle Sam’s money, which makes the true cost of fees on your money even higher.
By deferring taxes to later, Uncle Sam is coming for his share of your retirement when you’ll need the money the most. And when the time comes, there’s no guarantee of how much he’ll take.
The state and local governments will take a piece of your retirement too. Unless you live in a state with no income tax. But what if you defer taxes in a low income tax state and retire in a high income tax state like California? Certainly something to consider.
Then there’s your social security benefit.
Single Filers: Show annual taxable income of $25,000 - $33,000, 50% of your social security benefit is subject to income tax in the tax year filed. If you have taxable income over $34,000, 85% of your benefit is subject to income tax in the tax year filed.
Married Filers: Show annual taxable income of $32,000 - $43,999, 50% of your benefit is subject to income tax in the year filed. Taxable income over $44,000, 85% of your social security benefit is subject to income tax.
Your Medicare payment is next in line. It’s taken out of your social security check each month. The amount taken depends on your (means tested) taxable income. The cost/tax will range from $135 - $430 per month.
The good news, your next in line and will get what’s left!
So, you put up all the money, take on all the risk and will give away more than half of everything you’ve saved for your retirement.
If you’re okay with being 6th in line, I guess you’ll stay the course.
If not, you may want to schedule some time to talk about solutions that put you first in line.
This link provides access to my personal calendar - click here
I look forward to talking with you.