I Thought the Bush Tax Cuts Were “Only for the WEALTHY!!!!!”?

Nobody said anything about screwing the next generation of siver-haired Grannies over if they expire.

Stern Advice: Tax apocalypse in your retirement account

Amid all the gloom and doom about forced retirement, skyrocketing healthcare costs and nest egg-cracking financial markets, there’s another threat facing baby boomers: future tax liabilities.

The generation that has depended solely on 401(k)s and tax-deferred individual retirement accounts may not realize how much of a tax hit it will take when it starts withdrawing the money and living on it.

With the prospect of rising tax rates after the Bush tax cuts expire, some retirees could find themselves paying even more in taxes than they did when they were working. “It continues to surprise our clients that taxes are that big of an expense in retirement,” says Mark Davis of SunTrust Investment Services, Inc.

He estimates that clients who optimize retirement withdrawals to minimize their taxes can end up with as much as 33 percent more to spend in retirement years than they would if they ignored the impact of taxes.

Call your local Democrat for answers.


Right. Gotcha.

ths adds: Buongiorno Instapundit visitors and molto grazie, Glenn!

17 Responses to “I Thought the Bush Tax Cuts Were “Only for the WEALTHY!!!!!”?”

  1. JeffS says:

    Yay. I may end up collecting cardboard to supplement my pension after all.

  2. currently says:

    The Democrats in govmint will take all your money it can get its grubby hands on, then waste it.

    ‘Tax-deferred’ seemed like such a good idea until ‘taxed-to death’ became a govmint goal.

  3. Ken says:

    I might feel some sympathy for these old people had they not consistently voted into office some of the most irresponsible and profligate politicians in history.

  4. Gary from Jersey says:

    Ken, not much sympathy for them, either. But give a thought to the millions who saw what was happening but couldn’t stop it. Hint: it wasn’t old GOPers who let millions of illegals into the country to loot the welfare system, etc, etc.

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  6. tree hugging sister says:

    The problem, as I see it, is that a vast majority of Americans are being forced into 401ks as traditional retirement (hell, traditional EMPLOYMENT) goes the way of the dinosaur. So it’s no longer a question of a bit of your personal savings being invested to augment those halcyon golden years, it’s the whole financial enchilada tied up in products very few people truly understand. They just toss money at either their corporate 401k rep, the “guy at the bank” or pray their financial advisor isn’t really the fellow out to lunch/golfing in the commercials. All that while they’re still working.


    The article does have some good suggestions to consider. I’ve sent it to Crusader, as well, since he’s our financial whiz kid here on this block.

    Of course, voting Republican this go ’round wouldn’t hurt a lick, either.

  7. richard40 says:

    Ken says:
    June 1, 2012 at 8:35 am I might feel some sympathy for these old people had they not consistently voted into office some of the most irresponsible and profligate politicians in history.

    To Ken, this old person, 58, has consistently voted for fiscal responsibility. I might also point out that older citizens are big Tea Party members and normally favor less gov spending. I do admit that some old people (not this one) are excessively rigid on making small cutbacks on senior programs to make them fiscally sustainable (partly because they listen to AARP and dem propoganda).

    A bigger question is why in the world young people voted for Obama and the dems, and continue to favor him, when they will be the ones that get stuck paying the bill for his out of control spending. After all, us oldsters will mostly be dead by the time the gov goes broke, while you younger guys will be screwed. But young people continue to be underrepresented in the Tea Party, and continue to vote for Obama and the dems. And they even support those idiot socialists OWS guys.

  8. phwest says:

    This has always been an issue with 401k/IRAs. It has nothing to do with rates changing and more to do with deductions and how people draw money from the accounts. By the time you are drawing on your retirement accounts you will no longer be taking any deductions/tax credits for your kids, and for many the mortgage deduction will be much lower by then as well. Worse, if you need to make a big withdrawl, that means a spike in your income that could easily drive you into a higher bracket.

    Everyone should always remember that the government owns a share of your IRA/401k (other than Roths). You can’t treat it like a bank account and not expect to pay a price for that. Everyone nearing retirement should set aside a decent sized emergency fund using after-tax money so that you can maintain a smooth draw rate on your IRAs and minimize taxes. Once you retire, review all your income sources and plan out a withdrawl schedule for the IRAs including the tax impacts. That is the point of the referenced article.

  9. tree hugging sister says:

    Crusader sends, “Well, just always consider the ROTH conversion, as it may do well to suck it up now, then pay higher taxes tomorrow.

  10. PacRim Jim says:

    Inflating the currency deflates the retirement account.
    Still happy you voted for Obama, seniors?

  11. fred says:

    Been in retirement plans consulting for 20yrs. Right now I am drawing down my IRA WITH penalties, and considet that safer than letting it sit there, subject to govt confiscation.

    Remember- the govt can tax and take money and will when it needs to- and tax free retirement plans and the mortgage interest deduction and still inflated equity in homes is where the money is, in the middle class- and if you taxed 100% and took every dollar from the 1% you still wont be able to pay the bills.

  12. Novice says:

    @Richard. It’s nice to see that at least some of our elderly citizens understand where this problem came from and where it’s going to take us. I agree with Ken though. It’s hard to feel sorry for the generation that continually elected politicians that promised them the world for nothing (nothing except their children’s future’s that is). I know I’m going to have to keep paying into the system and I’ll never see a dime of it.

  13. Constitution says:

    I said before and I’ll say it again; spend your money on sex, drugs and rock-n-roll today, for tomorrow you may not get that chance.

  14. tnt says:

    Quit griping. I’ve been contributing to IRAs and 401ks since 1982. Everyone knows that money was contributed pre-tax and that it was almost guaranteed tax rates would change–maybe down–probably up. The ‘deal’ we all got was the tax deferral on income and capital gains. Anybody complaining about this is just griping. Even if I pay a higher marginal rate when i retire in a few years it has been a good deal.

  15. Mr. Bingley says:

    Actually, no, the ‘deal’ was that when you were withdrawing your money for retirement you would be taking a lower amount out, say $30,000 per year, than you were when you were putting it in, when you earned say $60,000 and would thus be in a lower bracket which would mean it would be taxed at a lower rate than when you earned it.

  16. tnt says:

    Mr. Bingley is partly right. We did expect to have lower marginal rates in retirement, but most of the gain comes from the fact that you could save $2000 in 1982 tax deferred and that amount grew at a tax-deferred compounded rate, depending on how well the investment did, until you take it out. Even if the final tax rate I pay is the same as the tax rate I avoided in 1982, it was still a good deal.

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