Phil Cannella looks
at retirement differently than most retirees and most financial advisors because his family suffered a catastrophic loss of their nest egg shortly after retirement. He now helps thousands of American retirees avoid the same catastrophe.
During the Accumulation Phase, you may feel secure knowing that you are putting away money that will allow you to retire safely and happily. Whether you’ve contributed to a 401(k), 403(b), IRA, SEP, Keogh or other government sanctioned retirement account, you knew you were getting the advantage of growing tax-free money from your earned wages throughout your working years. So what’s the problem?
Phil Cannella points out that what most people fail to understand about their retirement accounts, which is that they don’t remain tax-free forever. Make no mistake about it, Uncle Sam will come to collect starting at age 70½.
The Required Minimum Distribution (RMD) begins on April 1st after the year you turn 70½, and it requires that you begin taking the RMD withdrawals from your retirement accounts even if you don’t need the money yet.
If that’s not bad enough, the IRS taxes you twice on those withdrawals, first when the RMD is withdrawn, and then second by forcing you to report the withdrawals as income when you do your taxes. Plus, Phil Cannella reminds you that if the additional income bumps you into a higher tax bracket, you have to pay even more.
Let’s look at the following scenario to illustrate this point:
Let’s say you’re 70½ with $1 million in an IRA account. On April 1st, you’ll have to withdraw $36,500 and pay taxes on the new income. At tax time, you’ll report it on your tax return and add it to your Social Security income, and then you’ll add your pension income along with all other income including reinvestments, dividends and interest income. Has that new total income figure pushed you one or two tax brackets higher? It easily could. And if it does, your Social Security taxation rises along with it. And you’ll have to do that each year.
You can learn more tips and information to help you safeguard your retirement by visiting Phil Cannella’s website: http://retirementmediainc.com; his blog: http://crashproofprinciple.com; and tuning into his Crash Proof Retirement Show®.