One of the first lessons of saving for retirement is to try to max out your 401(k) or individual retirement account (IRA), but some financial advisers are warning people not to put all their eggs in one basket.
If you have a limited amount of money to stash away for retirement, it’ll serve you better if you split that money into different types of savings vehicles, including brokerage and Roth accounts, they said.
Having different buckets to draw money from to fund your spending in retirement offers a lot of benefits, but the most notable one is tax savings, they said.
“You don’t want all your money in tax-deferred accounts,” said Daniel Razvi, senior partner and chief operating officer at Higher Ground Financial Group. “IRAs are the biggest scam in taxes today.”
Why’s having only 401(k)s and IRAs bad for your taxes?
- IRAs and 401(k)s are tax-deferred investments, which means the money you invest isn’t taxed until you withdraw the money, usually in retirement. The problem is we don’t know what the tax rate will be in the future, though it’ll most likely be higher, advisers said.
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“Say, we start a business, and I put in 25%, you put in 75% and do more work,” Razvi said. “You don’t read the fine print of the contract like most people don’t, and 20 years go by, and the business is amazing. Now, I’m seeing the contract and realize I have the ability to change the percentage without your…
