Monday, October 7, 2013

Are You Falling for the BIG Lie about Your Retirement Tax Situation?

Are You Falling for the BIG Lie about Your Retirement Tax Situation?

Perhaps you haven’t noticed this, but the group in our society that, for lack of a better word, complains most vocally about paying too much in taxes is retirees. How can that be, when it doesn’t match one bit with what conventional financial planners teach us? Aren’t we supposed to magically fall into a much lower tax bracket during retirement because we would be bringing in less income, compared to when we were working? In fact, isn’t this the number one principle at 401(k)/IRA seminars?

 In my practice, hardly a day goes by without my meeting with an already retired person who is experiencing what I call “retirement shock” in my books, Is Your 401(k) a Trap? and 5 Mistakes Your Financial Advisor is MakingThe interesting thing in all of this is that these are folks who have indeed experienced significant drops in their incomes but are actually being clobbered with taxes because their effective tax rates have increased – yes, gone up – after retirement!

So the question remains: How is this possible? You see, what many of these so-called financial advisors are ignoring, or may be unaware of, is that under our tax laws, your income tax bracket is based on your “taxable” income – notice the keyword here is taxable, not gross income. Far too often, what happens is that although your gross income might be lower when you retire, your taxable income will not automatically follow if you also experience a significant drop in certain deductions, like the pre-tax contributions you used to put into your retirement account and your home mortgage interest.

Here’s the bottom line. In reality, at least from what I hear and see on a daily basis, nine out of 10 retirees in this country find themselves in an undesirable, unexpected tax hell, simply because of short-sighted financial advice that, quite frankly, does them more harm than good. You might find this surprising, but the fact is that there are retirees whose income in retirement is much higher compared to when they were working but who pay much less in taxes. The key is whether your income is taxable or not – and fortunately, are there simple things you can do to inoculate your income from the tax man.

Are you following the right financial advice? 
Would you like to talk with an experienced professional with a proven-track record to learn how to preserve more money in retirement  whether you're about to retire or have already stopped working? Call 877.656.9111 or visit to schedule a no-obligation consultation RIGHT NOW!

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