THE NEW HOLISTIC RETIREMENT • 63
Crunching Numbers Like many savers, my retirement assets were spread across more than one account. So, when I went to analyze my total tax liability , I decided to just focus on one account: an IR A with ar ound $ 700,000 in i t. I looked at that $700,000 and thought of all the places it would be taxe d . First, I used a few assumptions. I assumed my wife and I would have a 25 percent total tax liability (federal and state) both now and in retirement. Next, I assumed my IR A would grow at an annual, pre- tax rate of 5 percent. Because I wanted to determine the maximu m in taxes my IR A could potentially generate, I also decided to model what would happen if I didn’t spend the income I took out of t he account. Rather, I factored placing that income in a taxable acco unt earni ng an after-tax return of 4 percent. And, since I wanted to see how much tax I would pay over my lifetime, I assumed I passed away at age ninety. Pretty conservative assumptions. I think you’ll be as s tunned by the r esults as I was . Let’s look at all the places my IR A money could be taxed as I use it, and then we’ll add it up and determine the total tax liability of my IRA. • My IR A will be taxed whe n I withdr aw funds , either for income or as r equired minimu m distribut ions (RMDs). As you may know, at a designated age in your 70s , the IRS requires you to withdraw a minimu m amount fro m your IR A each year, called RMDs. Why?Because you’ve bui lt up a lo t of tax-deferral in you r
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