What is a retirement time bomb?
A retirement time bomb is when you put all or most of your retirement savings into these tax-defferred accounts like 401ks and Traditional IRAs. When you get into retirement and start withdrawing your money, you have to pay taxes on every single dollar you pull out! At what rate? It depends, but the money you pull out is taxed as ordinary income, which means for those of you who think your taxes will go down in retirement – you might be in for a big surprise when all of that money is taxed as though you earned it! For those of you who have socked away a lot of money into tax-deferred accounts for retirement – these have become a ticking time bomb waiting to explode! And Uncle Sam is licking his chops!
