Will you pay taxes on gains today, later, or never?
Based on current tax rates, would you rather pay taxes today, or in retirement? How can you position your assets so you can keep more of your money?
The average American has most of their retirement money in a bucket where they will have to pay the tax in the future. This means they will pay taxes when they retire and start pulling money from theses savings vehicles. This is a common strategy because their employer offers a 401k as an option. That makes it very convenient. They don’t see it come out, so it doesn’t hurt as bad. What’s also really nice is that many employers offer a match on the employees contributions up to a certain %. That really makes it worth it. Why not take the free money, right?!
Things to keep in mind
So if we look at the history of taxes, we are having some of the lowest tax rates in history. Do you think taxes will go down, stay the same, or go up? Considering our national debt… Would it make sense to pay the tax today, instead of later? Ask your advisor which option would make most sense in your situation.
The idea is to stay invested, but also diversified against taxes, market loss, and inflation.
Let us know what you think below.