Dear Clients & Friends:

I wanted to update everyone on a critically important, and often overlooked, aspect of retirement planning.  While saving for retirement is imperative to achieve long-term financial security, the “savings vehicles” that most Americans use today have serious and significant tax implications that can derail those well intentioned “retirement plans”.  Historically, we have been taught or instructed to use “IRAs” and “401(k)s” as our primary means of saving for retirement.   However, without proper tax planning and protecting your assets from catastrophic tax liabilities in the future, the use of these traditional “retirement savings vehicles” is becoming increasingly risky to your financial security! 

If you have assets currently held within IRAs and Qualified Employer Plans (i.e. 401(k), 403(b), etc.), or, your retirement “plan” is focused on contributing to these retirement accounts in the future, I strongly suggest you evaluate your planning options and educate yourself of the realities of these “tax deferred” retirement vehicles! 

Attached is an article I recently wrote – “The U.S. Government’s Next Target – Your IRAs and 401(k)!  If you, your friends or family members are facing this situation or have questions about retirement planning, I welcome the opportunity to talk with them about their situation and their planning options.

Thank you.

 

Daniel T. Johnson

President, Certified Estate Planner

Retirement Specialist

 

The Next Big Target – Your IRAs and 401(k)!      

With the possible exception of home equity, the most valuable asset for most Americans is their retirement fund.  However, most people don’t know that the U.S. government has set its sights on pillaging the next BIG target – the low hanging fruit called your “retirement accounts”!

The embedded income tax liabilities on retirement accounts are huge and will undoubtedly become even more crippling to savers in the future.  With nearly $20 Trillion currently held within retirement accounts (nearly 100% of which is taxable) – the U.S. government is working overtime in efforts to tax and control your retirement accounts now!

Are you using “traditional” retirement accounts in your retirement planning?

Retirement accounts were created by Congress to encourage retirement savings and lessen the burden on the social security system.  Retirement accounts are not designed to serve as wealth transfer vehicles to heirs, nor the most efficient retirement income vehicles.  In fact, they are often terrible “income” and “wealth transfer” vehicles due the embedded income and estate tax liabilities.  Without implementing the proper tax protection planning, it is likely not a matter of “if” or “could” a tax crippling event occur, only a matter of when – either during your lifetime, during the spousal transfer or during the beneficiary inheritance!  Without tax protection planning, your retirement accounts will suffer crippling losses due to income taxes!

Currently, and under proposed changes, your retirement assets are subject to taxation rates up to 50% – 85% at the time of distribution, or, transfer to your heirs.  Avoiding the issue, or deferring the tax liability (not taking distributions until required by the IRS), does not make the problem go away! 

Is your retirement nest egg (and financial security) subject to extreme risk?  You better believe it!!

Yes, times are changing!  There are immense political pressures to raise taxes – specifically income taxes.  Retirement accounts (this includes your IRAs, 401(k) and other employer plans) are in the cross hairs and subject to massive taxation risks in the future!  In fact, you might be shocked to learn that you may soon be considered one of those “rich folks” if you have indeed saved for retirement (did you know that nearly 85% of Americans currently have less than $25,000 in retirement saving!).

Saving for retirement is necessary to achieve financial security.  The real question is – “How do you effectively structure your retirement savings to provide you with the most tax efficient and sustainable retirement income during your lifetime and protect it from future taxation risks?”

The good news – Extremely effective tax and estate planning strategies are available today which dramatically reduce the taxation risk to you and your family!  However, protecting your retirement assets and your legacy to your heirs does require proactive planning on your part!  While generally reserved for persons with more than $100,000 in tax deferred retirement accounts, these plans are fast becoming an integral component of comprehensive retirement and estate plans.  

Whether you are still working and saving for retirement, or currently retired, the time for prudent planning is now.  Neglecting to implement proper asset preservation and tax planning strategies for retirement assets today will likely cripple your retirement nest egg and jeopardize your financial security in the future.

Learn how significant tax and policy changes will affect you and what you can do about it now!  Call me today with questions or more information – (512) 346-6444.