The US Congress just passed the major change to the Health Insurance industry. As anyone who understands how Government works, these plans are paid for using one of several things: Increased Taxes or sell more Government Debt(Bonds) or asking the Federal Reserve to print more money(or combination of all three). My bet is that Taxes will be increased. That may be a good or bad thing for some, but how does all this impact your retirement? Let's explore this. We will start with the current Income Tax situation.
Here are the current Tax Brackets(assuming you are married filing jointly):
These Tax cuts that were signed into Law by President Bush, will expire the end of 2010. The top two brackets (33% and 35%)will go to 36% and 39.6% respectively. If you are making more than $209,251 per year, your taxes are going to go up...maybe more.
There is a March 21, 2010 article in Yahoo Finance on the amount needed to save for retirement named: " 1 Million Doesn't Cut it for Retirement" In this article, some industry experts state that more than $1,000,000 is going to be needed for retirement. I would agree with this premise also.
So let's add these two things together. Let's say that you have $1,000,000 in your retirement plan. Let's supposed that you have done real well with your 401k plan and invested and saved prudently. You followed Money Mag's recommendations. The instant that you turn 60, you start to withdraw this money, or you want to roll it out into an Annuity that will stretch out the money for the rest of you life. At this point, you will pay the IRS a check of $396,000! How long can you live off of $604,000 at age 60? This is based on a person retiring THIS YEAR BEFORE 2011! Also it assumes that this person will have $1,000,000 in the 401k plan. What happens if it is less? With inflation and increase Taxes, who can afford to live off of less especially when you are older?
People are living longer, and will have different needs as they get older. Most folks will run out of money before they turn 70 if the previous scenario is followed(which most people it is less than $1,000,000, and will be dependent on some form of Government Welfare. There is a better way. We can show you how to convert those dollars while Taxes are lower to accounts that can potentially provide a TAX FREE RETIREMENT! Call us at 919-352-9260 to find out how to have this TAX FREE RETIREMENT!