- While you end up paying taxes on your retirement savings one way or another, you have at least partial control over how much you pay and when that happens.
- If you are considering a Roth conversion to eliminate taxation on withdrawals down the road, be sure to see how the move would impact your current tax situation.
- There may be strategies to minimize what you pay on converted amounts.
Watching your retirement account grow can be exhilarating.
However, if it’s a 401(k) or individual retirement account holding pre-tax contributions, don’t forget Uncle Sam owns a portion of the balance you see.
“All too often, investors look at their traditional 401(k) statement forgetting that they have a partner invested there alongside them,” said certified financial planner David Mendels, director of planning at Creative Financial Concepts in New York. “While you may conveniently forget, your partner will not forget about you.”
How much the IRS gets via taxes and when that happens, though, is partly up to you.
