If you are paying into a 401k program you may be taking advantage of the tax deferred benefit of the program. This can be appealing because of the promise of a lower tax rate when you take the money out during retirement. There are times where having tax deferred money can actually work against you. Take some time to consider using non-tax deferred contributions in these cases.

Emergency Access

Most 401k plans will allow you to withdraw money from your account in an emergency before you reach the age of 59 ½. Unfortunately the instances where this money can be withdrawn without a high penalty are very specific. If you need to use the money for something else, you could be paying a high tax penalty.

Mandatory Distribution

Most retirement accounts require that distributions begin at the age of 70 ½ regardless of the situation the holder of the account is in. If the person is not yet ready to retire and is still working this could mean a huge increase in taxes due to the additional income.

Taxes Go Up

When was the last time you remember taxes going down? In the future, odds are that taxes are going to continue to increase. This means that a lower rate today may actually end up being higher in the future than the tax you would pay today.

For legal assistance with retirement accounts contact Stano Law group.