Most Americans worried about taxes siphoning retirement funds

Most Americans worried about taxes siphoning retirement funds

A majority of Americans are concerned about taxes siphoning money out of their retirement accounts, according to new research.

More than 70% of roughly 1,000 U.S. adults surveyed in August said they are worried that taxes will go up and affect accounts like 401s. The data also showed that they have little confidence in the reliability of Social Security's tax-advantaged income.

What data does it say?

Almost three-quarters of those polled said they are worried about higher taxes affecting their retirement income in their Individual Retirement Accounts and 401s, both of which are tax-deferred savings vehicles.

The investors are so worried that roughly the same share said they would stop using that advisor if their current financial advisor didn't help them manage taxes on retirement income. Gen Xers, or people who were born between 1965 and 1980, were most willing to fire their financial advisors if they were not effective at managing taxes on their retirement income, followed by millennials and baby boomers.

In addition to their nervousness regarding their investments, the survey respondents expressed not feeling confident in the public retirement safety net.

Seventy-two percent said they can't count on Social Security benefits when considering where they'll get their income in retirement, and an even greater percentage said they are worried about the future of Medicare and Social Security programs.

But the program has been grappling with a long-term insolvency crisis, which has been a source of unpredictability for years. The latest projection from the nonprofit Committee for a Responsible Federal budget estimates that the trust fund used to bankroll Social Security will run out of reserves by 2033 if Congress fails to reach an alternative solution to increase its funding, resulting in a universal benefits cut of 23% for recipients.

When your retirement plan is tax-deferred, such as the case with IRAs, 401s, annuities and 457 plans, it means you don't pay taxes on your contributions. While your contributions are immediately deductible, you can subtract them from your taxable income when you sock away the money. Kelly LaVigne, the vice president of consumer insights at Allianz Life, says tax increases can have a negative impact on your retirement portfolios, especially if you haven't factored tax strategies into your retirement plan and diversified across tax categories. To maximize your tax diversification, look at how your retirement accounts are taxed and consider how to allocate your money among them.

You want to put your money into three different pools: an account with long-term capital gains, one with taxable income, and one with non-taxable income.

In a statement, LaVigne said, LaVigne said: 'It's a good thing that we haven't done much in our past,' he said.

If you're considering retirement, you'd be wise to start thinking about taxes ahead of time. While there isn't a clear answer on how much people should have saved before retirement, Americans average that they'll require at least $5,000 a month to live comfortably in retirement, according to a recent survey.

Jill Cornfield has covered retirement for more than 10 years. I agree to the terms of use and privacy notice provided by Money and consent to the processing of my personal information.

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All data provided here is accurate as of the published date.