Paying taxes now and having tax-free withdrawals in retirement can offer peace of mind and simplicity during your retirement years. Here are a few reasons why some people find this approach mentally advantageous:
- Certainty: By paying taxes on your contributions now, you have a clear understanding of the portion of your retirement savings that is truly yours, without the uncertainty of future tax rates.
- Budgeting: Knowing that your retirement withdrawals won’t be reduced by taxes can make budgeting and financial planning easier. You can more accurately estimate your retirement income needs without having to account for taxes.
- Flexibility: Tax-free withdrawals from Roth accounts provide flexibility in managing your income in retirement. You can strategically withdraw funds without worrying about pushing yourself into a higher tax bracket or triggering taxes on Social Security benefits.
- Legacy Planning: If you anticipate needing only some of your retirement savings, a Roth account can be a tax-efficient way to pass on wealth to your heirs. They’ll inherit the account tax-free and can continue the tax-free withdrawals over their lifetime.
- Reduced Stress: For some, the peace of mind that comes with knowing taxes are already taken care of can reduce stress and make retirement more enjoyable.
However, it’s essential to weigh this mental benefit against other factors, such as your current tax bracket, future income expectations, and retirement goals. Consulting with a financial advisor or tax professional can help you evaluate these factors and determine the best strategy for your situation.
As always, check out our website and blogs for more info on these strategies.
About Chris
Chris Heisten is the President and Founder of Heisten Financial LLC, a fee-only financial planning firm focusing on giving clients back their time so they can spend it doing what’s most important to them. Acting as a true fiduciary for his clients, Chris aims to solve their financial pain points by incorporating tax planning saving strategies and moving them toward financial freedom. In the financial industry since 2007, Chris has partnered with families with the same questions and complexities as he and his family. He guides the journey through life, striving to instill calmness and a sense of direction as he simplifies the complex. He loves seeing clients experience relief when they achieve what they thought was impossible.
Chris graduated from the University of Maine, where he played hockey on a scholarship, and retired from professional hockey in 2007. In the community, he remains engaged, serving as a youth hockey coach. Chris holds the CERTIFIED FINANCIAL PLANNER™. Outside the office, he enjoys trying new food and wine, reading, traveling, playing golf and hockey, fat tire biking, and donating to local charities. His passions include being a husband and dad, lake life with the family, watching his son and daughter play sports, and spending time with his wife. To learn more about Chris, connect with him on LinkedIn.