Why You Could Make More In Retirement Than While Working

Jan 9, 2025

Why settle for less in retirement? Discover how strategic financial planning and smart investments can lead to greater income during your golden years. The power of compounding plays a crucial role in maximizing your earnings. Plus, understand the tax implications of 401(k) and IRA withdrawals—it's more than just deferred income. This insightful discussion emphasizes the importance of disciplined saving and the potential for financial freedom in retirement.

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ADVICE

Retirement Contributions

Contribute to your 401k and IRA to benefit from pre-tax contributions and tax-deferred growth.
Understand that withdrawals later will be taxed as income, not capital gains.

INSIGHT

RMDs and Taxes

Required Minimum Distributions (RMDs) mandate withdrawals from retirement accounts at a certain age.
Most people don't consider RMDs or their tax implications until much later.

ADVICE

Roth IRA Considerations

Consider a Roth IRA for tax diversification, but weigh the loss of future tax-reduction options.
Maintaining optionality is valuable.

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One of the biggest reasons I was against contributing to a Roth IRA is my belief that most people won’t make more money in retirement than while working. As a result, they’re unlikely to pay a higher tax rate in retirement than during their working years.

While most Americans earn less in retirement, you aren’t most people. You subscribe to the free Financial Samurai newsletter and are obsessed about money and living an incredible life!

Readers of personal finance sites like this one are likely saving far more and investing more strategically than the average individual. We're a nerdy bunch who care immensely about our financial future.

Thanks to the power of compounding, decades of disciplined saving and investing could result in you earning far more in retirement than you ever anticipated.

And perhaps equally as important is understanding how 401(k) and IRA withdrawals are taxed. They are considered deferred income and will be taxed as income, not capital gains.

You can read more and discuss on my post: Why You May Make More In Retirement Than While Working. There's an example too.

Reach Financial Freedom Sooner With Boldin

If you’re serious about building wealth and retiring comfortably, consider signing up for Boldin’s powerful retirement planning tools. They offer a free version and a PlannerPlus version for just $120/year—an affordable alternative to hiring a financial advisor. For the paid version, there's a free 14-days trial.

Boldin was specifically designed for retirement planning, providing a holistic approach to financial management. It goes beyond managing your stock and bond portfolio by integrating real estate investments, guiding Roth conversions to minimize taxes, helping with college savings, and addressing other real-life financial scenarios we all face.

As I approach the traditional retirement age, I’ve found Boldin’s tools particularly helpful in deciding how much to convert to a Roth IRA. The ability to model various “what if” scenarios has been invaluable for planning my future, especially for when I’m older and less able to manage my finances.

To Your Financial Freedom,

Sam

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