Would you like to retire without paying taxes? Who wouldn’t? But would you like to do it legally? If so, you have three options:
- Don’t withdraw any money from your retirement accounts after you retire.
- Die before you retire or before you begin withdrawing money from your retirement accounts.
- Use the Roth IRA or Roth 401k/403b options available to you.
Option 1 doesn’t seem very logical unless you have figured out a way to live without spending a dime. And never fear, Uncle Sam will get his money anyway because the government will force you to withdraw money from your retirement accounts at age 70.5. That’s right, the government will force you to take money out of your retirement accounts when they believe you have waited long enough. Isn’t freedom grand? (This is so the IRS can get its grubby little hands on as much of your retirement income as possible).
Option 2, on the other hand, doesn’t seem very appealing either.
Because you have to die.
And even if you avoid the tax man with option 2, he may get his share if you leave a significant estate. But options 1 and 2 definitely drive home the truth that nothing in life is certain except for death and taxes.
Make the right moves with option 3 today, however, and you could build a retirement income that is free from taxes. The majority of Americans are aware of the benefits of Roth accounts, but most are not taking advantage of them. According to the “Retire Without Taxes” article in Money magazine’s October 2008 issue, “Fidelity Investments estimates that even though 90% of American households are eligible for a Roth IRA, only 19% actually have one.” What about you?
For more information about the various Roth account options that may be available to you, check out this related post.
