A new report from B.O.S.S. Retirement Solutions and Advisors sheds light on three critical mistakes people make when managing their IRAs and 401(k)s. These errors can significantly impact retirement savings, especially considering that 64% of Americans fear outliving their nest egg. One key mistake is not understanding the tax implications of traditional IRAs and 401(k)s.
While these accounts allow for tax deferral on contributions and investment growth, taxes will eventually be due on both the original contributions and accumulated growth when withdrawals are made in retirement. This tax liability can be unexpectedly high, particularly when Required Minimum Distributions (RMDs) kick in at age 73. Many retirees find themselves in high tax brackets due to substantial withdrawals from their tax-deferred accounts.
These withdrawals can also trigger taxes on up to 85% of Social Security benefits and double Medicare premiums. This “retirement tax time bomb” often results from maximizing contributions to tax-deferred accounts without considering future tax consequences. To mitigate these pitfalls, experts recommend converting some or all savings from tax-deferred accounts into tax-free Roth accounts.
Retirement tax planning essentials
Although taxes will need to be paid on the converted amount, future withdrawals from Roth accounts will be tax-free, potentially leading to significant long-term tax savings. Ryan Thacker and Tyson Thacker from B.O.S.S. Retirement Solutions emphasize the importance of proper tax planning in retirement.
It can save tens of thousands – even hundreds of thousands – of dollars,” they state. Understanding and avoiding common mistakes is crucial to making your savings last longer. B.O.S.S. Retirement Solutions offers a free report titled “3 IRA and 401K Mistakes That Could Cost You a Fortune” to Utah residents.
The report provides detailed information on these mistakes and tax planning strategies to help individuals better manage their retirement savings. Led by Tyson and Ryan Thacker, B.O.S.S. Retirement Solutions has assisted over 50,000 families with retirement planning. Their strategies focus on minimizing taxes, optimizing IRAs and 401(k)s, and maximizing Social Security benefits.
The firm has received the Utah Best of State award for Retirement Planning multiple times. For personalized advice, it is always recommended to consult with a qualified tax advisor or financial planner to ensure your retirement plan is tailored to your unique circumstances and goals.
