Comment on The other enemy of 401(k) plans (and your retirement)

The other enemy of 401(k) plans (and your retirement)

Many middle-income retirees are now paying taxes on those withdrawals at a 28.25 percent rate. Retirees with Social Security benefits can pay 28.25 percent on withdrawals from their retirement plans. As a consequence, an obscure tax that hit a handful of affluent retirees in 1984 today hits 30 percent of all retirees. Over the last 30 years, the first enemy of our retirement savings plans was high fees. The source is an Excel accumulation model that I built and use. The worker saves 6 percent of income and gets raises 1 percent greater than the 2 percent inflation rate. Take 2 percent in fees, and the accumulation drops to nine years, a loss of five years of final income. The plans offered to public school teachers are a prime example. Social Security and retirement account income between $48,000 and $96,000 takes the hit. Social Security benefits are added to taxable income by a formula. Inescapably, the taxation of Social Security benefits hits middle-income retirees hardest.

 

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