Retire in a higher tax bracket?
what happens to my 401K if I am in a higher tax bracket by the time I retire? If I want to withdraw I will pay more taxes?
Public Comments
- You don't need to start withdrawals from 401Ks and IRAs until you're 70 1/2 years old. By that time mostly everyone drops into a lower tax bracket. Most of your income by then is passive and is typically related to Capital Gains. Until the Democrats screw that up, the Republicans have instituted a lower tax rate on capital gains. This will more than likely drop you a tax bracket. Also, with your withdrawals, you're able to select the method that you withdraw based on. You can withdraw annual amounts that allow you to recalculate your life expectancy every year. This essentially allows you to take out less money every year allowing you to pay less in taxes.
- Yes. Its true that you don't have to make withdrawals until you are 70 ½, but most people are looking to start withdrawals earlier than this. Chances are if you are young now you are in a lower tax bracket than you will be in when you retire. Facts: You will be taxed based on the bracket you fall under when you make withdrawals. Solution: Consider making contribution to a ROTH IRA if you believe you are in a lower tax bracket now than you will be in when you retire. This is also save because you are getting taxed NOW, so when you go to take the money later it is tax free. It is always a good idea to diversify your money to various funds. In this case you are protected in case the Tax rate increases greatly for some variant reason.
