You might want to consider getting your money out of your 401K/retirement account and roll it over into a Roth IRA account.
Currently the highest tax bracket is 35%, which is one of the lowest maximum tax rates this country has ever had since the inception of Income Taxes. The original maximum tax rate was only 7.5% and that only applied to the highest incomes in the land, multi-millionaires like the JP Morgan, John Astor, Carnegie, etc. The rate rapidly grew to include almost everyone and the highest tax bracket had reached 90% in the 1920s. Ronald Reagan dropped the old maximum from 50% down to the current 35%.
With Obamas current Healthcare plans and the tremendous debt accumulated by the current and previous administrations, it is inevitable that taxes will go up significantly. Yes, Obama has promised that the taxes will only go up for those who make over $250K per year, so this will not affect you immediately. But, what will the tax rate be when you retire and need to get at your nest egg of $250K or more??? By then the tax rates can easily be back up to 50% or even more..perhaps much more !! Do you want your government to get half of your lifetime savings?? I know I dont.
Check with your tax advisor, but most will agree that taxes are going up, and the assumption that you will be in a lower tax bracket when you retire is a lie. If you have over $250K in your retirement account, you will pay whatever is the maximum tax rate at that time, and every indication is that the maximum tax rate is going up very soon !!
Yes, you will have to pay the taxes on the money in your 401K now to move it into an Roth IRA, but paying the taxes now and getting your money out from under a higher tax burden later is better. If you roll your 401K money into a Roth IRA you only have to pay the current tax rate, but no 10% pentalties for being under 59.5 years of age.
You could keep your money in your 401K or other retirement account and only draw some of the money out each year, however the government requires that you withdraw all of your retirement account funds by the age of 70.5 years. However if you die, your wife or children will get the money, and they will be stuck with the tax burden. You are better off getting your money out, buy a nice life insurance policy with part of your money and your kids will be financially secure since life insurance is not taxable.
If your employer contributes 100% matching funds to your 401K, you may not care if the government takes half of your money in taxes since you immediately doubled your money when you invested your portion, but it still may be to your advantage to get your money out while the tax rates are still low.
Im not giving financial advice, just some food for thought and something to discuss with your own financial advisoror better still a knowledgeable tax advisor.
...Rich
Currently the highest tax bracket is 35%, which is one of the lowest maximum tax rates this country has ever had since the inception of Income Taxes. The original maximum tax rate was only 7.5% and that only applied to the highest incomes in the land, multi-millionaires like the JP Morgan, John Astor, Carnegie, etc. The rate rapidly grew to include almost everyone and the highest tax bracket had reached 90% in the 1920s. Ronald Reagan dropped the old maximum from 50% down to the current 35%.
With Obamas current Healthcare plans and the tremendous debt accumulated by the current and previous administrations, it is inevitable that taxes will go up significantly. Yes, Obama has promised that the taxes will only go up for those who make over $250K per year, so this will not affect you immediately. But, what will the tax rate be when you retire and need to get at your nest egg of $250K or more??? By then the tax rates can easily be back up to 50% or even more..perhaps much more !! Do you want your government to get half of your lifetime savings?? I know I dont.
Check with your tax advisor, but most will agree that taxes are going up, and the assumption that you will be in a lower tax bracket when you retire is a lie. If you have over $250K in your retirement account, you will pay whatever is the maximum tax rate at that time, and every indication is that the maximum tax rate is going up very soon !!
Yes, you will have to pay the taxes on the money in your 401K now to move it into an Roth IRA, but paying the taxes now and getting your money out from under a higher tax burden later is better. If you roll your 401K money into a Roth IRA you only have to pay the current tax rate, but no 10% pentalties for being under 59.5 years of age.
You could keep your money in your 401K or other retirement account and only draw some of the money out each year, however the government requires that you withdraw all of your retirement account funds by the age of 70.5 years. However if you die, your wife or children will get the money, and they will be stuck with the tax burden. You are better off getting your money out, buy a nice life insurance policy with part of your money and your kids will be financially secure since life insurance is not taxable.
If your employer contributes 100% matching funds to your 401K, you may not care if the government takes half of your money in taxes since you immediately doubled your money when you invested your portion, but it still may be to your advantage to get your money out while the tax rates are still low.
Im not giving financial advice, just some food for thought and something to discuss with your own financial advisoror better still a knowledgeable tax advisor.
...Rich
