Most Americans worried about taxes siphoning away retirement funds

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Most Americans worried about taxes siphoning away retirement funds

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

In a third-quarter market perceptions study, insurer Allianz Life said that more than 70% of roughly 1,000 American adults surveyed in August said they're worried that taxes will go up and affect accounts like 401s. The data also showed that they have little confidence in the reliability of tax-advantaged income from Social Security.

What data does it say?

In more than three quarters of thesurveyed survey respondents, they are worried about higher taxes impacting the retirement income in their Individual Retirement Accounts and 401s, both of which are tax-deferred savings vehicles.

They're so concerned that roughly the same share said that if their current financial advisor didn't help them manage taxes on retirement income, they would quit using that advisor if their current financial advisor didn't help them manage taxes on retirement income. Xers, or people born between 1965 and 1980, were the 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.

Despite being nervous about their investments, respondents expressed not confidence in the public retirement safety net.

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

The program has faced a looming insolvency crisis for years, but the program isn't likely to disappear. The latest projection from the nonprofit Committee for a Responsible Federal budget estimates that the trust fund used to finance Social Security will run out of reserves by 2033 if Congress does not reach a solution to increase its funding, resulting in a universal benefits cut of 23% for recipients.

When a retirement account is tax-deferred, such as the case with IRAs, 401s, annuities and 457 plans, it means you don't pay taxes on your contributions. If your contributions are immediately deductible, they can be substituted from your taxable income at the time you sock away the money. Tax increases can impact retirement portfolios, especially if you haven't factored into your retirement plan and diversified across tax classes, according to Kelly LaVigne, vice president of consumer insights at Allianz Life. As you look at how your retirement accounts are taxed, you should consider how to best allocate your money among them.

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

In a statement, LaVigne said he was not aware of the condition of the company's financial holdings.

Considering the high cost of retirement, savers should start thinking about taxes in advance. Although there is no absolute agreement about how much money people should have saved before they retire, Americans estimate on average that they'll need 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 on Money, and consent to the processing of my personal information.

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All information given here is accurate as of the published date.