Let me prove it to you.
Who designed 401k’s, 403(b)’s, SEP’s, Simple IRA Accounts, IRA’s? Congress.
And who enforces those provisions? The IRS.
They set the rules and upon you contributing to these types of
retirement plans, you’ve made a deal with the (some might say the devil)
government. Still not convinced, give me
a call and I’d be happy to discuss this in detail.
Just to be clear, I’m not saying you shouldn’t utilize these
types of retirement planning strategies; however, when you do, you need to be
clear about the rules and how to make the most of these strategies. So you’ve spent years saving for your
retirement, which is outstanding, but at some point, two things are going to
happen: You live a long time,
distributing funds from your retirement accounts prior to your death (best
option) or you die prematurely with funds still inside your retirement
Ok, so what, you might say. Well, remember a few key items: These are pre-taxed accounts that in
retirement will be taxed as you distribute funds (70 ½ being the magical age at
which you have to start taking required mandatory distributions) and Uncle
Sam’s going to tax those distributions at ordinary income tax rates. But, let’s say you die. At that point, IRA’s
401k’s 403b’s, SEP’s, Simple IRA accounts will be taxed as ordinary income for
your beneficiaries, plus they may be subject to an estate tax on top of
this. For 2012, the Federal Estate Tax
Exemption is $5million, but come January 2013, it’s scheduled to return to a $1million
When you factor state and federal tax rates plus potential
estate taxes we may be subject to, it’s easy to see how our beneficiaries may
not receive that which we have set aside for them. See How
to Help Protect Your IRA Accounts from Uncle Sam.