Americans Seeking a Retirement Miracle
Americans Seeking a Retirement Miracle

By Gregory Bresiner

Americans think a secure retirement is impossible. But effective retirement planning strategies exist.

Many Americans worry they will run out of money in retirement and it’s getting worse, a new survey shows.

Four in ten U.S. investors think that it’s going to take a miracle to be able to retire financially secure. Nearly half (46 percent) of millennials feel this way, according to the 2021 global retirement index by Natixis Investment Managers.

The index showed the United States dropping one step to 17th place in a survey of 44 countries’ national financial wellbeing. Three-quarters of respondents say increasing levels of government debt will lead to Social Security cuts.

But retirement experts believe some strategies offer a good chance of accumulating and preserving a secure retirement nest egg. They say not all retirement savings vehicles are equal. Some strategies effectively preserve retirement savings.

“As a general principle, with some exceptions, one should defer using qualified assets as long as possible,” Boyan Doytchinov, a financial adviser in Medford, New York, told The Epoch Times. “That is a good starting point in retirement planning.”

Qualified assets, IRAs, Roth IRAs, 401(k)s, are valuable because the longer investments compound without taxation or reduced taxation, the more likely one can achieve and maintain financial independence, Doytchinov says.

The idea of maximizing the tax advantaged assets is very important, according to Charles Hughes, a longtime financial adviser in Bay Shore, New York.

“The point of accessing qualified assets last is right on the mark. It is the smart thing to do,” he told The Epoch Times.

According to Hughes, a delayed qualified asset withdrawal strategy is so important that he uses it to the fullest extent.

“Delay taking required minimum distributions from qualified accounts each year until the end of the tax year in December,” Hughes says.

He also advises using the same tax-savvy/compounding idea in building retirement assets. Try, Hughes notes, to make annual IRA contributions at the beginning of the tax year in January. This speeds up compounding. Done every year over decades, it greatly increases a retirement balance, Hughes says.

“We tend to delay the use of retirement assets as long as possible,” added Steve Branton, an adviser in San Francisco, to The Epoch Times.

The best retirement distribution strategy, argues Brian Behl, an adviser in Pewaukee, Wisconsin, depends on each person’s tax situation. But “for many it is to spend taxable accounts first, then tax deferred accounts like 401(k)s and IRAs, and lastly tax-free accounts like Roth IRAs,” he told The Epoch Times.

Successful wealth creation and protection for both retirees and pre-retirees can often turn on how long compounding takes place, advisers say.

Did one obtain the highest balance to secure the rest of one’s life? This is a critical element because many Americans live longer than their parents and some are on the road to running out of money before they die, according to retirement experts.

Each retirement plan must be unique, advisers say, but all must focus on preserving assets. But first, one must accumulate. That means, says another adviser, taking advantage of tax avoidance while saving through qualified vehicles.

“Not only does saving for retirement either allow you to reduce or defer your taxable income,” says adviser Melissa Brennan in Plano, Texas. “You can also receive a tax credit for saving for your retirement if your income is under a certain limit,” she told The Epoch Times. “All of these tax incentives are in place because the government really wants us to plan ahead and save for retirement. “

Brennan says it is essential, no matter what strategy is used, to have a tax-savvy retirement plan, to be disciplined in making retirement accounts contributions each year, and avoid breaking into retirement accounts prematurely and triggering tax penalties.

This keep compounding as long as possible strategy includes the first years of retirement, ages 59.5 to 72. At age 59, a retiree can start accessing qualified money without penalty but one is not required to do so.

Why delay taking qualified retirement money for as many as 13 years?

Once money is accessed, it is subject to taxation, Hughes adds. At age 72, one must start taking withdrawals from most qualified accounts. But the withdrawals must be somewhere between a required minimum or maximum distribution. These numbers are based on estimated lifespan.

(A Roth IRA is an exception; one is never required to take distributions but one can take distributions without paying investment taxes).

Do you need some of your qualified money between ages 59 and 72? Hughes asks. Then try, if you can, to take a minimum qualified asset distribution, possibly using more of your taxable assets. Thus, the compounding effect of qualified assets, important in generating comfortable numbers, is protected.

For example, Hughes says, “say you have a million-dollar account and your required minimum distribution is $200,000. If you can afford to do so, only take the $200,000, which will subject to taxation,” according to Hughes. The remaining $800,000 balance, Hughes says, can continue for another year of growth.

These tax strategies can increase the chances of a successful retirement, says another retirement expert, when one is starting to accumulate.

Why have a retirement plan? Why be particular in accumulating retirements and how one spends it?

These compounding, tax avoidance strategies, advisers say, are critical in answering possibly the most critical question of all retirement planning: Will or will not someone go broke in the golden years?

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