Retirement Plan Paradise

Where will yours be? Let us take a look first at where we are now. If you want to save on income taxes, put $5,000 to your retirement savings account and save this income to make it tax-free. That will save you at least $750 dollars. If you are at least 50 years old, put another $1,000 dollars, and save another $150 at least. Under this same tax saving mechanism on retirement, the maximum amount you could set aside tax-free today is $46,000. You will save about $23,000 in taxes and at the same time plan money for future retirement.

There are also other tax-saving retirement planning options between these two recommendations available but you should seek professional advice on the plan that will suit you best.

For Americans in the high income tax bracket, it makes a lot of sense to set up personal retirement plans. And in the absence of any further sensible legal tax-saving mechanism we could find, we are left with this “only one better choice instead of paying Uncle Sam and Cousin Arnold” as I tell my clients.

In an event in the future and some important need that may cause you to withdraw from this retirement savings, the penalties of about 13% percent on the withdrawal is still in the books. The supposed income tax liability had the retirement money not been saved will also kick in at withdrawal time. This penalty is “punitive” and it is what most people do not like.

Today, unfortunately, retirement funds are 40% down from its grown value (the original money saved and the income it earned), a “paper loss” that Americans are expecting to recover from soon. I feel positive the investment market on retirement accounts will change for the better. No one knows how long it will take for the investment market to recover but it is better to have a positive outlook.

Some clients I meet resent this government recommended American retirement planning options because of their downsides. Some people in the life insurance industry also believe that “life insurance planning” (on policy cash values) around and inside the premiums paid is a better option over the long haul. Some stockbrokers also convinces us that consistent stocks investments that yields a growth rate of 20% yearly, is the best “retirement investment” option (maybe, not anymore.) Many people also used real estate investments in the past as their leverage to retirement planning, but unfortunately not so now with real estate values having been ruined significantly everywhere.

I am convinced each of us should think through our own personal retirement planning options. The statistics indicate only a small percent of Americans become financially independent at retirement age. Obviously, the social security retirement benefits cannot be relied upon completely even as it helps.

What do people do at retirement age? I still see many of them working at WallMart, at the Post Office and still in the workplace doing odd jobs. I see many of them in the Tax Practitioner community.

Maybe, what I have been doing for a living for a long time now is a job for the retired. I wish I could say, I have already retired a long time ago. But then I know there is no rest for the wicked in me. Where is retirement plan paradise then if there is such a place? Some people in Asia find it in the Philippines. Some Americans find it in Mexico.

What is your plan? Or is it really my plan or the Lord’s? Think about it. I am thinking of the best place for you, my friend.

Angel Y. Dayan, EA, CPA, ABA is a Graduate Fellow in Tax Practice and has a Masters Course in Tax Representation. He is a Federal Tax Practitioner in 50 States and Certified Public Accountant in Texas. He has associated taxes with retirement planning for his client’s best interest. His office is located at 150 East Olive Ave., Ste.116 Burbank, CA. His telephone is (213)-365-1040. You could visit his website at www.taxwork.com

Last 5 Posts by Angel Dayan

• Marikina Town Under Water - October 6th, 2009
• Re-Evaluating Retirement Contributions - August 28th, 2009
• Manny Pacquiao and Taxes - August 19th, 2009
• Praying For Clients - August 10th, 2009
• Son Of A Lender - July 5th, 2009