As if retirement wasn’t complex enough, many of the people who are heading toward 65 in the next few years may have a new curveball to contend with. The issue comes down to the amount of taxes that they’re going to have to pay on their savings accounts once they want to withdraw the money. It’s either then or when they’re forced to take the money from their IRAs at 73. The problem for retirees, particularly those who haven’t been proactive in preparing for this situation, is that they may just end up paying whatever the rate is when they retire. Currently, there’s quite a bit of speculation that tax rates are going to go up in the coming years. What’s the best course of action in this situation? Should folks look to retire early to at least know what the rate is going to be when they decide to withdraw their money?
Waiting a few years until they reach 65 could be counterproductive, even with the few extra years to put money into the account. This, of course, would be true if tax rates go up drastically. The first thing that many people need to keep in mind is that the money that’s currently in their accounts hasn’t been taxed yet. Another thing that many people may have been counting on was falling into a lower tax bracket once they don’t perceive as much income. Those brackets could also be adjusted in the coming years. Therefore, that’s not necessarily the best strategy to ensure that more money from the account goes directly to benefit the holder.
The best way forward may be to diversify some of those assets while the person still can. In some cases, they may not be able to withdraw from their accounts prior to exiting the workforce. To be honest, in most cases, that wouldn’t be feasible either. Yet, one of the more popular ways to deal with the situation is to invest in an extensive medical insurance plan. That kills two birds with one stone. It provides the person with a good strategy for moving forward in the medical field. That’s especially the case if they don’t already have that side of their retirement covered. It’s one of the ways to essentially remove money from these accounts prior to retirement without massive punishments or even restrictions.
Ultimately, the most important thing for pre-retirees at this point is recognizing the fact that tax rates could be on the rise. The national debt situation is one of the issues that leads experts to believe that we could see an uptick in taxes throughout the coming years. If there’s still time for a person to contemplate this expense prior to exiting the workforce, they may be able to find ways to spend that money instead of having to essentially forfeit it. Again, it seems the biggest issue that people have once they decide to call it quits from the workforce is not understanding that the money in some of their accounts may still owe taxes. That’s something that virtually no one can afford to overlook.
