54 • RUBY, WILDING & SWANSBURG And, it gets worse. In truth, you’re paying back your IRS debt with interest. After all, you deferred taxes on your IR A contribut ions, and you’ve al so avoided paying tax es on th e growth. In theory, this has given you more opportunities to compound interest, but now, you’ll be paying income taxes on your IR A contributions and all the growth that’s occurred i n your account . The IRS is tak ing it s cut of your principal and your earni ngs. Your Silent Partner It’s time to start thinking of the IRS as sort of a "silent partner" in your IR A or 401(k). Just how big of a silent partner is the government? That dep ends on how b ig you r tax liabilit y is. Unfortunatel y, t he IRS is a part ner wh o ca n cha nge his ow nership share—without you even agreeing to it! And that’s because the government can change tax rates in the future. Imagine having a business partner who owns 25 percent of your company. You know that, in the future, as profits are distributed fro m your company, this partner will get 25 percent. But, one day, your partner informs you that he’s changed his ownership stake; now, you owe hi m 30 percent of your profits. That’s madness, right? We would never agree to a business partner th at can change his ow nership without our approval. But we allow the IRS to do it with our retirement accounts e ver y ye ar.
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