3 Reasons After-Tax Accounts Are Your Key to a Relaxing Retirement
Taxes remain one of the few remaining certainties you will face throughout your lifetime, but there are big opportunities available now to reduce their effects on your long-term financial plan. Financial pundits frequently lead people to believe that they will definitely be in a lower tax bracket in retirement and therefore should defer much of their income in pre-tax retirement accounts like 401(k)s or traditional IRAs.
However, the downside is that withdrawals from these pre-tax accounts are subject to tax. This leaves retirement savers open to future increases in tax rates. It also forces them to then consider the effect of RMDs (Required Minimum Distributions) on the whole of their taxable income.
From a psychological standpoint, I'd argue that simply knowing your retirement assets are all yours is worth a tremendous amount in and of itself -- not having to plan a staged liquidation of a pre-tax retirement account when you retire, I would argue, is a bargain at today's cost. Below you'll find three reasons why using after-tax retirement accounts like Roth IRAs can be a net benefit to you.
Source Fool.com
