Nov 03 2012
Every year about this time, individuals commence speaking about and taking into consideration things like IRA contributions. Most of the time, tax-sheltered investments make great sense. The federal and state governments have developed their tax laws to encourage such financial savings. Nevertheless, that mentioned, there are 3 scenarios in which it may be a poor concept to use tax-sheltered investments:
You know youll need the cash early
fixed index annuity
In this case, it might not be a great thought to lock away money you might want prior to retirement simply because there is normally a 10 percent early-withdrawal penalty paid on funds retrieved from a retirement account ahead of age 59 1/2. But you will also require income immediately after you retire, so the What if I want the money? argument is a lot more than a little weak. Yes, you may possibly need the money prior to you retire, but you will totally need to have funds immediately after you retire.
You dont need to have to conserve any far more for retirement
fixed annuity rates
Utilizing retirement arranging cars, such as IRAs, may be a reasonable way to accumulate wealth. And the deferred taxes on your investment income do make your savings grow a lot much more rapidly. Nonetheless, if youve currently saved sufficient cash for retirement, its feasible that you really should take into account other investment alternatives as nicely as estate organizing issues. This special case is beyond the scope of this book, but if it applies to you, I encourage you to consult a good personal monetary plannerpreferably 1 who charges you an hourly fee, not one who earns a commission by promoting you monetary products you could not need.
Your tax rate will rise in retirement
The calculations get tricky, but if youre only a couple of years away from retirement and you believe earnings tax prices will be going up (possibly to deal with the massive federal-budget deficit or simply because youll be paying a new state revenue tax), it might not make sense for you to conserve, say, 15 percent now but spend 45 percent later.
Source: http://www.packetinsider.com/blog/localvoices/?p=1160
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