3 ways a traditional 401(k) can affect your retirement paid Impact_Partner
In years past, if you asked your grandfather what his monthly retirement income would be, he would probably have a definite figure because he likely had a pension provided by his employer in addition to his Social Security income. Over the years, we have seen pensions fade from many employers, meaning retirees needed to find another means of supplementing their Social Security income.The 401 began in the 1980s to help supplement an individual’s Social Security and pension plan.
It may be that you would be better off paying taxes on your money now and contributing to a Roth IRA, or a properly structured life insurance retirement strategy. In both cases, the seed would be taxed, but the cash flow from it would be tax exempt if done properly. For example, let’s look at a 31-year-old man contributing $5,000 per year to a 401 for 31 years until he was 65 years old. He would have saved taxes on $155,000 of contributions when all contributions were added up. The illustration used then showed him taking money out every year and paying taxes throughout his life expectancy until he died and left the balance to his heirs and they paid taxes on the balance.
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