Tax Trap

Ever met someone who was retired and who had been successful in saving for retirement? I’ve met many who seem to feel overly taxed. They did the right things and saved and invested and when they need that money the tax burden feels heavy and a bit like a punishment for success.

When I was recently reviewing our own financial status I noticed something interesting. In the future, to access most of what we have in retirement accounts or in real estate we would be paying taxes on it. In a way it feels like the money is trapped by taxes since we have to lose some of it to use it. But for some of it that isn’t true. Roth IRAs and Roth 401k’s can escape that trap if we wait long enough. The thought certainly makes Roth retirement accounts more appealing. The Roth accounts seem to be a good way to address the tax trap. When we retire we can withdraw from our Roth retirement accounts tax-free. Tax-free, I like the sound of that. A lot better than tax trap.

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