• Max out your 401(k)!
• You’ll be in a lower tax bracket when you retire.
• Current tax deductions are worth more than future tax liability.

Here are a few thoughts about retirement planning. Those who spout conventional wisdom don’t talk about them.

• If you max out your 401(k) or tax deductible IRA and achieve the results that are illustrated by the sales rep who is selling this investment strategy (yes, your employer is paying commissions to someone) you will pay the IRS more in taxes during the first three years of your retirement than you saved over a 40 year working career. Every year after that the IRS will extract a large percentage of your income – including some of your Social Security.
• Retirees who retire successfully are generally in a higher tax bracket than they were before they retired. They have lost most of the deductions they had when working – mortgage interest dependents, retirement plan contributions, etc. In addition, successful retirees’ incomes often are greater than pre-retirement incomes. Of course, if you plan not to succeed then all bets are off.
• During all those years that you put money into a retirement plan and cheered as the money grew tax deferred, you were adding to your retirement tax burden. When you take money from your retirement accounts, it is all taxed as ordinary income. All that growth, which would have been taxed at the lower capital gains rate before you retired, is taxed as ordinary income after.

There are other strategies for retirement planning that do not rely on the tax-deductibility trap. You owe it to yourself and your future to find out more about these strategies, which have been tested and proven for over 150 years in America and around the world.

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