59% of employees who aren’t saving for retirement think they are, according to Principal Financial Group. IRAHelp.com Founder and CPA Ed Slott Joins Wealth! to discuss retirement plans and some of the changes you should take advantage of.
“Everyone thinks inflation is bad, and I understand that because things cost more. But when it comes to taxes, inflation is great because tax brackets are also widening So, more money can go out at lower rates. And the other opportunity now is low inflation rates… So the key to that. anyone saving for retirement is if you have an IRA, a 401(k), remember that these accounts are loaded with taxes. So the only way to access that money is by paying taxes. , if you can withdraw that money now, because I’m worried about future tax hikes, we have debt limits, laws can change, so anyone storing money in an IRA or 401(k ) should be taken action,” says Slott.
He calls Roth IRAs “the best account ever” because they generate tax-free income. He adds: “The only question is: how much are you willing to pay to get it? And the price you pay is the tax rate which, as I said, is very low right now. So you’re talking about generations. Young people should only do Roth IRAs. He notes that young people “have time on their side” to build tax-free wealth in a Roth IRA.
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This article was written by Mélanie Riehl
Video transcription
Saving for retirement can be confusing.
59% of people who aren’t saving for retirement think otherwise, according to Principal Financial Group.
And often, changes in the process can mean you lose money or benefits.
So to explain what this year’s opportunities mean for you, we have Ed Slot IRA, founder of Help.com and CPA, here with us at Studio Ed, also founder.
Um, excuse me, the author of the new book The Retirement Savings Time.
Bomb tick scale.
I guess he’s also the founder of the ideas that go into the book here, Ed.
Nonetheless, thank you very much for taking the time to be here.
Absolutely so.
Let’s look at some of the changes that have turned into opportunities this year.
For people saving for retirement, what principal do they need to benefit from?
Well, change is the opportunities for things you wouldn’t have thought of with taxes and inflation.
Why is that?
Well, everyone thinks inflation is bad, and I understand that because things cost more.
But when it comes to taxes, inflation is high because the brackets are also widening.
Tax brackets, so more money can be withdrawn at lower rates, and the other opportunity now is the low rates, these are the low rates that we have right now.
We now have historically low tax rates, so the key for anyone saving for retirement is to have an IRA or 401k.
Remember that these accounts are loaded with taxes.
The only way to get this money is to pay taxes.
So if you can take this money out now because I’m worried about future tax increases, we have debt limits.
Laws can change, so anyone storing money in an IRA or 401k should take action.
I call these retirement savings time bombs.
It’s the tax.
I call it a fiscal time bomb.
Say that three times fast, I. I don’t want to hear it, but you WILL.
So timing is everything, and you also talk about it in your book.
Here, I mean, it looks different for everyone across generations and depending on what your actual target day funds might look like here as well.
So what’s the best way to really do the math based on your own timing?
Where should the reflection process begin?
A word.
Roth Roth.
Two words.
Roth IRA This is the best account ever created of all, not even just for retirement, because it grows tax-free, with no income tax for the rest of your life and even 10 years beyond for your beneficiaries .
So everyone knows it’s the best account to have.
The only question is: how much are you willing to pay to get it?
And the price to pay is the tax rate which, as I said, is very low today.
So you’re talking about generations.
Young people should only do Roth S IRAs. Imagine if people my age, the baby boomers, had the opportunity to start from $1 by building a tax-free retirement account.
All their money is placed in taxable accounts.
So imagine if you’re starting a job or you’re in a job and you’re years old.
You know, young people have time for themselves.
You should only do Roth 401k S at work where your money grows, builds and accumulates tax free or Roth IRA S to contribute to a 401k plus, just for a deduction you have to pay back at worst possible moment years late or retired, it’s no longer worth it.
And so one of the other mechanisms that people are trying to really familiarize themselves with in case they’re feeling philanthropic, qualified charitable distributions here as well.
How can this help as part of a broader strategy?
Well, it’s a limited population. It’s a good thing to give to charity if you are charitable.
I never say give to charity to save taxes, because if that were true, give all your money away.
You have no taxes.
Nobody does that.
But if you’re giving to charity anyway, the best dollars to give are your S IRA, and they have this provision for qualified charitable distributions.
The only problem is that it is limited.
It is only available to IRA owners age 70½ or older.
But if you’re in that age range and you have an IRA and you want to donate to charity, this is the way to do it.
Because you can withdraw your money at a 0% tax rate.
Which generation do you think is best equipped or prepared for retirement because of some of the strategies that can be used now?
General X.
Actually, every generation, I was going to say Gen X and Millennials.
I guess it’s millennials, or whatever, because they have time on their hands.
But parents, baby boomers or maybe grandparents, have big accounts, and they could do it.
They are able to do Roth conversions, withdraw that money at low rates, move into tax-free territory and have more and keep more of their hard-earned money and even to pass it on to their generations.
It’s on IRA Help.com, founder and CPA and author of the book The Retirement Savings Time.
The bomb ticks louder Thank you so much for taking the time here with us today, certainly.
