If you’re like most people, you already know that you need to save more money for retirement. But how? You can only make so much money, and you can’t delay retirement forever. Short of selling a kidney on the black market (which we do not recommend), what else can you do?
Aside from simply making more money, the only way you can save more for retirement is by spending less elsewhere. In particular, you have to pay less taxes on your earnings. In fact, the greatest difference between the middle class and the wealthy is the amount of time the wealthy spend on minimizing their tax burden!
Just take a look at what happens in two accounts, which are otherwise identical except for their tax status:
Both accounts start with a balance of one dollar
Both accounts double every year
After 20 years, the balance in the untaxed account is over one million dollars!
After 20 years, the balance in the taxed account is … just over 51,000 dollars
How is this possible?
As you can see, one account is taxed while the other is not. But is it really possible that Account Holder Number Two paid that much in taxes???
Yes and no. Yes, that account holder paid taxes, but then he also forfeited interest that he would have earned on that money. Each year, the amount he paid in taxes could have been left in his retirement account, where compounding interest would help the money grow over time. And as you can see, over twenty years the difference was significant.
The bottom line is that the crippling effect of taxes goes far beyond what you pay.
So now that you can see what has to be done, you might be wondering whether there are tax-free financial instruments that can help you accomplish your goals. And the answer is yes! Give us a call, and we can help you build a tax-advantaged retirement fund.
This article originally appeared on arandmoneyinfo.com.
Author: Denise Arand
Denise Arand, Executive Vice President of Five Rings Financial West Coast: Denise believes that everyone is entitled to send their kids to college, retire with dignity, and save a pile of money for the future. She is passionate about making proven financial solutions available in an easy to understand way that brings hope to women, the middle-class, and those without nine-figure portfolios.
Author: Denise Arand Denise Arand, Executive Vice President of Five Rings Financial West Coast: Denise believes that everyone is entitled to send their kids to college, retire with dignity, and save a pile of money for the future. She is passionate about making proven financial solutions available in an easy to understand way that brings hope to women, the middle-class, and those without nine-figure portfolios.
