The Power of Tax-Deferred Growth
That´s exactly what happens when you invest in accounts that defer tax withholdings until the time of withdrawal.
Without tax deferral, assets grow more slowly. For example, when you pay taxes at the rate of 25% on your annual gains, it reduces the amount of your money that could be earning valuable interest.
As the chart above shows, over the 20-year period, a $100,000 investment, earning 8% tax-deferred returns, will grow to $466,096 over 20 years. That´s $145,000 more in earnings.
This chart is hypothetical and for illustrative purposes only. The hypothetical 8% rate of return shown is not guaranteed and should not be viewed ad indicative of the past or future performance of any particular investment.
Most People Will Spend More Time In Pre-Retirement – Planning Ahead for Their Future Retirement – Than In Retirement
That's why resourceful baby boomers are turning to research and financial coaches for the information they need to review their portfolios and address the question:
“What kind of pre-retirement planning do I require for a successful transition to life after work?”
More than about tangible strategies and solutions, a successful pre-retiree must think through one’s investment attitudes and behaviors to unlock the hidden power that lies in careful preparation in the pre-retirement planning stage of life.
Know What Plan Fees You Are Paying For Your Retirement
Twenty years ago, the cost of administering a 401(k) plan was primarily the responsibility of the employer. Today most of that burden has shifted to participants. According to a recent article in AARP,
“Although workers have not been receiving itemized bills for fees they pay in their 401(k) retirement plans, those hidden costs may be chipping away at the growth of their nest eggs.”
AARP estimates that hidden fees of 1% can reduce a worker's retirement returns by about 15% over 30 years. For an account of $1 million, that comes to $150,000.*
Mike Albertson and Heather Foster are Investment Advisor Representatives of, and Securities are offered through USA Financial Securities. Member FINRA/SIPC. A Registered Investment Advisor. 6020 East Fulton Street Ada, MI 49301. Tradewell Tax & Financial and USA Financial Securities are not affiliated.