When it comes to retirement – and to passing on whatever wealth you’ve accumulated to a spouse or the next generation – you may think you’ve thought of everything.
But despite your careful planning, it could be that Uncle Sam will be handing you a hefty tax bill while you’re living – or your beneficiaries one when you die.
“Even people who have been great about saving for retirement don’t always realize the tax implications of what they’ve done,” says Brett Sause, CEO of Atlantic Financial Group LLC (www.atlanticfinancialgroup.org). “They may have created a significant tax problem for themselves, and they could be leaving behind a tax time bomb for their beneficiaries.”
The scenario is a fairly common one, especially for baby boomers in or near their retirement years.
“Someone told you to get an IRA,” Sause says. “Or they told you to open a 401(k) because your employer was offering it as a benefit, and it sounded like a good idea.”
And those are good ideas – to a degree, he says. An IRA, a 401(k) or a 403(b) helps slice into your income tax bill today, putting more in your pocket now and less in the government’s. But these are tax-deferred plans, not tax free. [Read more…]