I believe there are some basic truths in the world. The sky is blue, winter comes after fall, and everyone HATES the IRS. I don't care what your political belief is, NO ONE likes the IRS on April 14! If we dislike the IRS so much, then why are we over using the 401(k) plans? These plans are full of traps, and the IRS loves them! What are these plans? How do they work? Let's talk about it.
These plans are part of Qualified Plans. The IRS has rules for these plans. Do you know the rules? Here are the basics benefits of these qualified plans: Tax Deductible Contribution, Tax Free Accumulation, Tax Free Distribution. You can only pick two benefits out of the three, otherwise it is Jail time. Most people pick a 401(k) plan without a licensed NASD representative to advise them on the mutual funds(which have traps also) during open enrollment for job. The contributions into the 401(k) plan are tax deductible for the current tax year. The money grows tax free inside of the account. The IRS wants you to participate and over contribute to these types of plans..why? Because of the taxes charged on the Distribution of the money after 59 1/2. These taxes charged will be at the current income tax rate at the time of withdrawal. Do most people think taxes will be lower or higher at retirement? If you said higher, go to the head of the class.
Why place money into that type of account? Because all the "experts" say so! These experts say that you will be at a lower income tax bracket? Do they have a crystal ball? Do they know something about the IRS that everyone else does not know? I believe that they don't know. Are 401(k) plans bad? No, but why not find out how it works? Learn the tricks of the trade.
You may be saying, "I can move my money into a Roth IRA after 59 1/2". That is a bad move also. The next question is: How long will your money last? You only have a finite amount of money in the account! There is a product that will allow you to save money with tax free growth, AND live on the retirement income TAX FREE? What is this account? Register at www.triplecompounding.com to find out more!
Robert Williams Jr