3 mins
May 11, 2022

Avoid This Common Mistake When Planning for Retirement

Avoid This Common Mistake When Planning for Retirement

Don’t let high tax rates catch you by surprise in this key area

When you’re preparing to retire, the last thing you want is to realize that the money you have in the bank may not last quite as long as you initially planned.

Unfortunately, this happens all too often, even to people who were proactive about saving from an early age.

Many of us are told to get a job with a steady paycheck, and start putting away money for the future in a 401(k) or IRA. And as an added bonus, we get to pay less income taxes — or so we might think.  

401(k)s, IRAs, and Taxes

When you put money into a qualified plan like an IRA or 401(k), that money is “tax deferred,” meaning that you don’t have to pay taxes on it, or on the returns it generates, right away. 

This remains true for as long as the money stays in the account, but when you withdraw money, you have to pay income taxes. As a result, the number you see in your account balance is significantly higher than the amount you’ll be able to have in your pocket. 

If you forget to plan for these deferred taxes, or you underestimate how much you’ll owe, you’ll likely find yourself having to choose between lowering your standard of living or postponing your retirement. This is especially frustrating, because the better your IRA or 401(k) performs, the more taxes you will have to pay. 

Fortunately, if you’re an Accredited Investor, there are other ways to build wealth during your working years, and to generate passive income during retirement so that you aren’t only relying on qualified funds.

White and Orange Text on Blue Background: “What is an Accredited Investor? Find out if you qualify for these advantages! Read Now.

How Tax Efficient Investing Can Save Your Retirement

Whether you’re early in your career, you hope to retire in a few years, or you’re a retiree looking to supplement your savings with new income, investing in tax efficient, cash flowing assets can offer the solution you’re looking for.

To start, take a look at your whole investment portfolio, not just your 401(k) and IRA. Different asset types, funds and accounts are taxed at different rates, so diversification can help you make the most of your opportunities and build the most tax efficient investment strategy possible. 

In particular, Accredited Investors can make direct investments in companies and a variety of other assets, which allows you to take advantage of additional tax benefits that aren’t available when you only invest in stocks or qualified plans. 

White and Orange Text on Blue Background: “Are Your Investments Tax Efficient? Find out how you could be saving big. Read now.”

Grow Your Wealth While Decreasing Your Taxable Income

If you’re looking for a simple way to create consistent passive income for your retirement, consider investing in the energy sector. The government wants to incentivize cleaner energy sources, so they are offering major tax advantages to individuals who invest in companies and products that are related to cleaner energy. 

For example, Accredited Investors can gain access to a direct investment in carbon capture equipment that is currently being used in the energy sector. This not only can provide consistent returns, but it’s also a rare type of investment that actually decreases the amount of taxes you pay on your earned income, which includes the income you withdraw from qualified funds. 

At First Generation Capital Partners, we’ve invested more than $3 million in Carbon Capture technology and have seen great results for clients who are looking to create predictable, tax efficient income for themselves and their families.

If you’re interested in investing in this and other strategic opportunities, contact us today to learn more. 

date
May 11, 2022
author
Billy Keels