Your Retirement Savings Account: Things you must grasp about it well before you retire

Do you understand whether or not your retirement savings will ever get taxed, or when that happens?  What exactly are mandatory withdrawals, and when do they start?  How to best leave retirement savings to your heirs?  If your grasp is fuzzy on any of these questions, then read on:

TAXES:  Unless your tax-sheltered retirement savings account is a ROTH type, then any money that you withdraw from it definitely will be taxed.  The government set this deal up for you (and it is a good deal, because it allows your money to grow faster) to encourage you to save…but eventually Uncle Sam wants his share, since your contributions were made with untaxed income.   (With a ROTH account, however, you’ve contributed net income, not gross.  Since you’ve already paid taxes, you won’t pay any more when you withdraw.)

MANDATORY WITHDRAWALS:  Once you hit age 70½, you must start withdrawing—and paying taxes on any money you’ve withdrawn (unless it’s a ROTH).   The minimum withdrawal at that age is only 3.65% of the total balance, but it increases gradually with each year.  However if you live to be 100, the minimum withdrawal is still only 15.87% of the total.  (No mandatory withdrawals are required for ROTH accounts.)

LEAVING $$ TO HEIRS:  Therefore, if you only withdraw the required minimum over the years, you can leave the rest to your children—who will then have to pay tax on their withdrawals.  Before Congress recently changed the law, your children were able to spread the withdrawals over their lifetimes, but now they must drain the accounts completely within ten years of inheriting it.  (Your children will not have to pay any taxes on withdrawals from a ROTH account.)

ROTH:  These accounts have definite advantages, and if you can afford to contribute net rather than gross income you may prefer to do that.  (Ask your tax professional if it makes sense for you.) However if you decide not to go with a Roth, know that traditional non-Roth savings accounts are still wonderful vehicles for saving for your retirement. 

For more details, read Liz Weston’s complete article:


Reasons to Buy a Cheaper House than the One You Qualify For

When beginning to shop for your first home, start with the options at the lower end of your budget.  If you find homes you like in that price bracket, then stop there. 

Let’s say you qualify for loan to purchase a 3,800 square foot home with a pool.  Very tempting, but deep down you realize that a 2,000 square foot home would be big enough for you.   For every additional $1,000 that you pay for the bigger house, you will be paying $1,000 plus interest.  By the time you’ve paid off the loan, you may well have paid double that.  Remember that buying a bigger house means bigger ongoing expenses, too: utilities, maintenance (roof repairs, painting, etc.)–and property taxes.

That’s money that might be better spent on other important goals over time, such as education, establishing an emergency fund, and saving toward retirement.

Many will argue that your house is a great investment and you should therefore push the limits of your spending ability a bit when buying.  Housing has certainly does appreciate nicely over the years, but the averaged stock values of the S&P500 have easily outpaced them over the past 50 years.  Just don’t allow yourself to be lured into spending more than you are financially comfortable doing.  Go for less than you can afford.  You can make improvements to your modest home, when you’re ready, thereby bumping up your equity in a safer, incremental way.

And do try to put 20% down on your house.  It will save you from wasting money on private mortgage insurance (PMI) and will help keep you from getting “under water” if the value of your home declines.  Aiming to put 20% down also helps you gauge whether or not you can really afford a particular house, too.  If you can’t afford 20% for that house, consider looking for a less expensive one, or else waiting—and saving up for that down payment.

Most Americans hold a deep-rooted belief in home ownership.  Its size, quality, and location are all status symbols.  We tend to say of families with a flashy car and a big, fancy house:  “They must have a lot of money!”  

Because this family is spending a lot of money on items that go beyond basic comfort levels—including the big house–we assume they’re in a great financial position.  But deep down, we know this isn’t rational.  To build wealth, you must spend less than you earn. 

Top SoCal real estate agent can help you buy real estate in Long Beach, Seal Beach, and San Diego. Find a house for sale that you will love.

To read David Weliver’s complete article, visit: