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The Grand Illusion of Being an “IRA Millionaire”

What does it feel like to be a millionaire?

Remember the show “Who Wants to Be a Millionaire”?Forget how great the show was — the title of the show was genius! That’s because seemingly everybody wants to be a millionaire. You might be telling yourself right now, “Wow, I’d love to be a millionaire. It’d make most of my problems go away.”

How many millionaires are in America right now? Specifically, as it relates to retirement funds, statistics tell us there are around 700,000 people in America with $1,000,000 in their IRA. You may think that’s a lot of millionaires, but there’s a problem with this construct.

Many retirees or pre-retirees are walking around thinking, “I’ve got a million dollars and I’m ready for retirement!” But what about taxes? If you’ve got $1,000,000 in a deferred, qualified account, then you don’t really have $1,000,000, do you? Because you’ve still got to pay some of that money to the government when you withdraw it.

We had a recent client looking to roll out their 401(k). With a 401(k), you get 60 days to roll that money over to an IRA. Our client was talking to their broker just before they rolled out the money, and the broker told them, “By the way, you’ve got to pay 99% of this in tax.”

That was a massive mistake. Can you imagine having $1,000,000 dollars in your account, and then suddenly finding out that every bit of it was taxable? That’s a big accounting error.

Here’s the grand illusion for those believing we’re “IRA millionaires.” You need to take a good look at your accounts and understand the real current value of our retirement. You have to start having real conversations with your brokers and financial advisors about what accounts hold your money. That’s the only way you’ll know what taxes you’re liable to pay.

Because if you’ve got $1,000,000 but you’ve got to pay taxes on it, then you don’t really have $1,000,000. If you have a 401(k) and somebody tells you all of it is taxable, you’ve got a problem.

You need to be able to sit down, figure out what type of accounts you have, and diagnose your long-term tax ramifications. That’s the only way you’ll understand exactly how much money you really have for retirement.

Luckily, our team at Hoffman Financial Group can offer the highest quality of retirement and tax planning in Atlanta and beyond. If you’re looking to evaluate your 401(k) or IRA, now’s the time to do it. Contact us at (888) 239-5880 or info@hoffmancorporation.com right now for top-notch financial services in Atlanta.

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