Are Taxes Scrambling Your Retirement Nest Egg?

Are Taxes Scrambling Your Retirement Nest Egg?

How often do you think about your retirement plan?

Depending on your stage of life, it may be decades down the road or it might be right around the corner. One thing’s for sure, though…

You want to make every dollar you save go as far as possible so that you can as well. Not only to enjoy your retirement without worrying about money, but also to pass along an inheritance to future generations.

Emron Andrew suggests breaking the process down into four distinct phases and then optimizing each phase so that you’re saving as much of your hard-earned money as possible for the future.

Each phase has its own considerations, and each phase has an opportunity for taxes to scramble up your retirement nest egg… and then take a big bite out of it.

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The key, Emron says, is to minimize the impact that taxes have on your money during each phase of the retirement planning process. He calls paying minimal taxes a “green circle,” and getting as close as you can to four green circles — one for each phase — makes a huge impact on your financial future.

The four phases of retirement are:

  1. Contribution

During this phase, you’re building your retirement fund through investments… whether you’re contributing to stocks, an overfunded life insurance policy or other investments like real estate.

To get a green circle on your contribution phase, look for ways to minimize the taxes you’re paying as you invest. Real estate is a good way to avoid paying taxes on long-term investments, for example.

  1. Accumulation

This is the phase that happens as time passes and your investments grow. Compound interest works overtime during this phase, but be aware that taxes also compound!

A green circle in the accumulation phase helps your investments grow without being cut into by taxes or fees. What are you paying your investment company for overseeing your stock portfolio? Will you be able to take out some of the money you’ve invested early if an opportunity or need arises… or will this result in high fees?

  1. Distribution

Your retirement marks the beginning of this phase. During the distribution phase, you’ll be collecting on your investment. This is the phase that you want to keep as healthy as possible so that you’ll have a good quality of life even if you live to be 100.

During this phase, you’ll want to pay as little in taxes as possible. If you’re losing money each month as your distribution comes out, your lifestyle might not be what you expected it to be as you planned for retirement.

  1. Transfer

When you pass away, you want to be able to leave a financial legacy for your children… and even grandchildren!

Make sure that your heirs don’t lose a large portion of their inheritance by looking carefully at ways to protect them from taxes once you’re gone. By having a good plan in place, you can ensure that future generations benefit from your financial foresight.

The earlier you start planning for retirement, the better… but Emron points out that it’s never too late to start.

Even if you’re starting at age 50 or over, you can still retire well. The key is in discipline, consistency and good financial planning that allow every dollar possible to grow.

With Purpose,

Dr. Patrick Gentempo

Patrick Gentempo