When Iras 401 Ks And Other Tax Sheltered Investments Dont Make Sense

When IRAs,​ 401(k)s,​ and Other Tax-sheltered Investments Don’t Make Sense
Every year about this time,​ people start talking about and considering things like IRA contributions .​
Most of​ the​ time,​ tax-sheltered investments make great sense .​
The federal and state governments have designed their tax laws to​ encourage such savings .​
However,​ that said,​ there are three situations in​ which it​ may be a​ poor idea to​ use tax-sheltered investments:
You know you’ll need the​ money early
In this case,​ it​ may not be a​ good idea to​ lock away money you​ may need before retirement because there is​ usually a​ 10 percent early-withdrawal penalty paid on​ money retrieved from a​ retirement account before age 59 1/2 .​
But you​ will also need money after you​ retire,​ so the​ What if​ I​ need the​ money? argument is​ more than a​ little weak .​
Yes,​ you​ may need the​ money before you​ retire,​ but you​ will absolutely need money after you​ retire.
You don’t need to​ save any more for retirement
Using retirement planning vehicles,​ such as​ IRAs,​ may be a​ reasonable way to​ accumulate wealth .​
And the​ deferred taxes on​ your investment income do make your savings grow much more quickly .​
Nevertheless,​ if​ you’ve already saved enough money for retirement,​ it’s possible that you​ should consider other investment options as​ well as​ estate planning issues .​
This special case is​ beyond the​ scope of​ this book,​ but if​ it​ applies to​ you,​ I​ encourage you​ to​ consult a​ good personal financial planner—preferably one who charges you​ an​ hourly fee,​ not one who earns a​ commission by selling you​ financial products you​ may not need.
Your tax rate will rise in​ retirement
The calculations get tricky,​ but if​ you’re only a​ few years away from retirement and you​ believe income tax rates will be going up (perhaps to​ deal with the​ huge federal-budget deficit or​ because you’ll be paying a​ new state income tax),​ it​ may not make sense for you​ to​ save,​ say,​ 15 percent now but pay 45 percent later.
When Iras 401 Ks And Other Tax Sheltered Investments Dont Make Sense When Iras 401 Ks And Other Tax Sheltered Investments Dont Make Sense Reviewed by Henda Yesti on July 07, 2018 Rating: 5

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