The retirement wrecking ball

𝐓𝐡𝐞 𝐰𝐫𝐞𝐜𝐤𝐢𝐧𝐠 𝐛𝐚𝐥𝐥 𝐭𝐡𝐚𝐭 𝐜𝐚𝐧 𝐝𝐞𝐬𝐭𝐫𝐨𝐲 𝐲𝐨𝐮𝐫 𝟒𝟎𝟏(𝐤) 𝐨𝐫 𝐈𝐑𝐀

There’s a simple math formula your financial advisor isn’t telling you that can wreck your 401(k) or IRA.

𝐌𝐚𝐧𝐲 𝐀𝐦𝐞𝐫𝐢𝐜𝐚𝐧𝐬 𝐰𝐢𝐥𝐥 𝐫𝐮𝐧 𝐨𝐮𝐭 𝐨𝐟 𝐦𝐨𝐧𝐞𝐲 𝐢𝐧 𝐭𝐡𝐞𝐢𝐫 𝟒𝟎𝟏(𝐤)𝐬 𝐚𝐧𝐝 𝐈𝐑𝐀𝐬 𝐦𝐮𝐜𝐡 𝐟𝐚𝐬𝐭𝐞𝐫 𝐭𝐡𝐚𝐧 𝐭𝐡𝐞𝐲 𝐭𝐡𝐢𝐧𝐤 𝐛𝐞𝐜𝐚𝐮𝐬𝐞 𝐭𝐡𝐞𝐲 𝐝𝐨𝐧’𝐭 𝐮𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝 𝐭𝐡𝐞 𝐬𝐢𝐦𝐩𝐥𝐞 𝐦𝐚𝐭𝐡 𝐭𝐡𝐚𝐭 𝐚𝐟𝐟𝐞𝐜𝐭𝐬 𝐭𝐡𝐞𝐢𝐫 𝐰𝐢𝐭𝐡𝐝𝐫𝐚𝐰𝐚𝐥𝐬.

There is a solution to this problem that I will share at the end, but you need to understand the problem first.

𝐇𝐞𝐫𝐞’𝐬 𝐭𝐡𝐞 𝐦𝐚𝐭𝐡:

Let’s say that Tom and Mary need $100,000 after taxes from their IRA to support their lifestyle in retirement. For simple illustration purposes, we’ll say they will owe a total of 30% in taxes on their withdrawals.

How much will they have to take out of their IRA to be able to pay both the taxes to the IRS and the $100,000 they need for their lifestyle?

I’ve asked this question to so many people and the answer I get 90% of the time is $130,000.
On the surface this answer makes sense. Thirty percent of $100,000 is $30,000, right? Add that to the $100,000 you need to pay for your lifestyle and there’s your answer.

But is that how it works?

It’s a little bit more complex than that. If you pay 30% in taxes, then you get to keep 70%. However, 70% of $130,000 is only $91,000, which leaves you $9,000 short.

𝐒𝐨 𝐭𝐡𝐞 𝐫𝐞𝐚𝐥 𝐚𝐧𝐬𝐰𝐞𝐫 𝐢𝐬 $𝟏𝟒𝟐,𝟖𝟓𝟕.

That’s $12,857 more than most Americans think. Therein lies the problem. Americans just don’t account for that in retirement because they’re simply not being told about it.

In other words, when the typical American calls up their financial advisor and says, “I need $100,000 after taxes,“ they think that their balance is going to go down by $100,000. In reality, it’s going to go down by $142,857.

Is it possible that quite a few Americans will be running out of money in their 401(k)s or IRAs a lot faster than they thought? It sure is, and it’s all because of this simple math formula that financial advisors and Wall Street pundits don’t tell them.

𝐇𝐄𝐑𝐄’𝐒 𝐓𝐇𝐄 𝐒𝐎𝐋𝐔𝐓𝐈𝐎𝐍: Use the tools the I.R.S. makes available to you to 𝐠𝐫𝐨𝐰 𝐲𝐨𝐮𝐫 𝐦𝐨𝐧𝐞𝐲 𝐭𝐚𝐱-𝐟𝐫𝐞𝐞. There are multiple tools that can provide great returns without the risk of market volatility and without having to pay taxes on your money when you need it most (in retirement).
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To have access to these specific tools, you need to speak with a licensed professional, like myself, who can help you find the best one for you and here's the best part... YOU DON'T PAY US FOR OUR HELP.