Deferring taxes may not be in your best interests. Do not assume that this is always the best alternative. Reasons:
(1) Today the tax brackets change based on inflation so more and more income may be taxed at low 10% and 15% rates when your income drops in retirement.
(2) Social security income may be taxed but the income limits at which they are taxed are NOT indexed to inflation. Income over only $44,000 (if married) makes 85% of social security taxable.
(3) If you have money in ROTH IRA's or taxable brokerage accounts, then using some of this money first in retirement may reduce your taxes later. Maybe.
(4) Deferring withdrawals from retirement accounts may result in a higher Required Minimum Distribution at age 70 and 1/2 that could have been avoided by taking some of that money early in retirement or not putting as much in there in the first place. Maybe.
(5) Don't forget estate taxes. ROTH's and taxable accounts may not be taxed to your heirs depending on "step-up-in-basis" laws (There is no estate tax but currently $1.3 million for 2010 and another $3 million pass tax free but these laws are expected to change).
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.