Don’t Forget the Tax Consequences!
The inadequacy of retirement savings for most of America is a well-published situation. But for those who believe they have created a comfortable financial cushion, it’s a good idea to verify that the consequences of taxation are correctly factored into that belief. Specifically, be careful not to overlook the fact that withdrawals from defered compensation plans, like 401ks and iRAs, become taxable when funds are withdrawn. The IRS looks at these withdrawals as ordinary income at this point, a reality that will move you up in the tax hierarchy. And while you’re looking ahead at your finances, keep in mind that your Social Security benefits are also likely to be taxed, perhaps up to 85% of you benefit! Not a pleasant thought, but is reality!
For more on this matter, check out a post by The Motley Fool’s Katie Brockman presented by www.usatoday.com. Read it here…