{"id":1479,"date":"2007-05-29T08:05:10","date_gmt":"2007-05-29T15:05:10","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1479"},"modified":"2007-05-29T08:06:36","modified_gmt":"2007-05-29T15:06:36","slug":"401ks-iras-urban-myths","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1479\/401ks-iras-urban-myths\/","title":{"rendered":"401(k)’s IRA’s & Urban Myths"},"content":{"rendered":"

In a recent post, Retirement — A New Class Being Created<\/a>, I predicted a new class of retiree living a life tied to their free and clear home, with little monthly income. It inspired some interesting comments, and a question that is the inspiration for this post. One reader, Eric, was surprised to hear his 401(k) would be taxed when he retired and began taking distributions. So he asked the following question.<\/p>\n

Help a young man out here – what tax bite do you speak of? Early withdrawal? I was under the impression that so long as a 401k built up to a certain age (65?) that it was relatively tax free?<\/strong><\/p>\n

Rain on my parade, I’m wearing my parka. \ud83d\ude42 <\/strong><\/p>\n

It’s not Eric’s fault (at least mostly) he thinks his withdrawals would be ‘relatively’ tax free. I’ve had many people in my office tell me what they know<\/em> on the subject, most of it based on what some expert at work told them. But alas, it is taxed just like you’re being taxed now Eric.<\/em> And if you’re not taking out what Big Brother thinks you should be by the time you’re in your early 70’s, they’ll make you take out more, or penalize your butt.<\/p>\n

That’s when Chuchundra came in to soften things up for poor Eric. Chuchundra then offered some advice to Eric using the number one urban myth out there on the subject. In his comment,<\/em> Brian Brady<\/a> recognized this advise for what it was — pure urban myth. Chuchundra said:<\/p>\n

If you have a standard, pre-tax 401K or IRA, you pay tax on your distributions. It’s considered regular income. You didn’t pay tax on the money you put in or on the capital gains that money made over the years, so you pay when you take it out. The idea being that you’ll be in a lower tax bracket when you’re retired, so the tax bite will be smaller<\/strong>.<\/p>\n

Now that might very well be true for those who followed the Grandpa Economics<\/a> school of How To Retire With A Free & Clear Home While Learning To Live On Coupons<\/strong>, Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

In a recent post, Retirement — A New Class Being Created, I predicted a new class of retiree living a life tied to their free and clear home, with little monthly income. It inspired some interesting comments, and a question that is the inspiration for this post. One reader, Eric, was surprised to hear his […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,28],"tags":[],"class_list":{"0":"post-1479","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-retirement","9":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1658,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1658\/keeping-up-with-what-frank-doesnt-know-earth-round-circles-sun\/","url_meta":{"origin":1479,"position":0},"title":"Keeping Up With What Frank Doesn’t Know — Earth Round — Circles Sun","author":"Jeff Brown","date":"July 25, 2007","format":false,"excerpt":"There's a mindset that has always befuddled me. It's origin seems to be grounded in the belief that if I've believed X for years, than something proclaimed to be superior to X just can't be true. Furthermore, the evidence I point to, is how many people agree with my belief\u2026","rel":"","context":"In "Retirement"","block_context":{"text":"Retirement","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/retirement\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3203,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3203\/who-should-use-eiuls-401ks-arent-cutting-it-for-most\/","url_meta":{"origin":1479,"position":1},"title":"Who Should Use EIUL’s — 401(k)’s Aren’t Cutting It For Most","author":"Jeff Brown","date":"June 3, 2008","format":false,"excerpt":"Equity Indexed Universal Life is, when simplified, investment grade insurance. It's a tool, a vehicle used by folks to create retirement income. I've written of this before, much to the chagrin of Mr. Swann. I've since put many clients into them using industry experts. Why? 'Cuz it's the right thing\u2026","rel":"","context":"In "Enduring Interest"","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1469,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1469\/retirement-a-new-class-being-created\/","url_meta":{"origin":1479,"position":2},"title":"Retirement — A New Class Being Created","author":"Jeff Brown","date":"May 25, 2007","format":false,"excerpt":"In the seminars we've been conducting in San Diego and out of state, we've been noticing a common denominator that is becoming more and more troublesome to us. It's the number of stories being told of parents, grandparents, or the storytellers themselves. It often begins with, \"My dad is in\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1661,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1661\/missed-fortune-and-the-wall-street-journal-the-value-of-a-50-cent-financial-planner-isabout-a-half-a-buck\/","url_meta":{"origin":1479,"position":3},"title":"Missed Fortune and the Wall Street Journal: The Value of a 50 Cent Financial Planner Is…About a Half a Buck","author":"Brian Brady","date":"July 15, 2007","format":false,"excerpt":"One of the tenets of financial advisory is the principle of fiduciary responsibility. Today, Wall Street Journal reporter, Jonathan Clements, openly criticizes the strategy Doug Andrew outlines in his best-selling book, Missed Fortune. Mr. Clements' article, When the \"Self\" in Self-Interest Isn't You, attacks the strategy as being completely self-serving\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1502,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1502\/point-weak-shout-loud-keeping-up-with-everything-frank-doesnt-know\/","url_meta":{"origin":1479,"position":4},"title":"Point Weak — Shout Loud — Keeping Up With Everything Frank Doesn’t Know","author":"Jeff Brown","date":"June 5, 2007","format":false,"excerpt":"Several days ago I wrote a piece talking about qualified plans, better known as IRA's and 401(k)'s. It was titled 401(k)'s IRA's & Urban Myths, and discussed some of the false beliefs many people have on the subject. It also brought an alternative to the table -- investment grade insurance.\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":916,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/916\/your-retirement-a-few-questions\/","url_meta":{"origin":1479,"position":5},"title":"Your Retirement — A Few Questions","author":"Jeff Brown","date":"January 22, 2007","format":false,"excerpt":"For those of you over 40, take a few minutes and contemplate your retirement. Here are a few tips on how to figure out more closely what it could be. Bring into focus your current financial state. In other words, where are you now? Recall the last time you thought\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1479","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=1479"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1479\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=1479"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=1479"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=1479"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}