Most Americans worried about taxes siphoning away retirement funds

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Most Americans worried about taxes siphoning away retirement funds

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

A third-quarter market perceptions study from insurance company Allianz Life found that more than 70% of roughly 1,000 Americans surveyed in August said they're worried that taxes will go up and affect accounts like 401s. They have little faith in the reliability of Social Security income, which is a tax-advantaged income source.

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Almost three-quarters of thosesurveyed said they're 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 worried that roughly the same share said that if their current financial advisor didn't help them manage taxes on retirement income, they would stop using that advisor. Millennials and Baby Boomers were the most willing to fire their financial advisors if they were not efficient at managing taxes on their retirement income, followed by Gen Xers.

Although they were nervous about their investments, they expressed no confidence 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 share said they are worried about the future of Medicare and Social Security programs.

The program isn't likely to fade, but it has faced a looming insolvency crisis 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 doesn't reach an alternative to its funding, resulting in a universal benefits cut of 23% for recipients.

If a retirement account is tax-deferred, such as the case with IRAs, 401s, annuities and 457 plans, you don't pay taxes on your contributions. With no expenses, your contributions are immediately deductible, allowing you to subtract them from your taxable income at the time you sock away the money. Kelly LaVigne, vice president of consumer insights at Allianz Life, said tax increases could have a negative impact on retirement portfolios, especially if you haven't factored tax strategies into your retirement plan and diversified across tax categories. What is the best way to diversify your retirement account and consider how to allocate your money among them.

If you want to put your money into three different pools, you'll choose an account with long-term capital gains, one with'regular' or taxable income, and one with non-taxable income.

In a press release, LaVigne said he was not available for comment, but that he could be reached by phone or by email.

If you're concerned about how expensive retirement is, it's wise to start considering taxes in advance. While there isn't a clear consensus on how much people should have saved before retirement, 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, 58, has covered retirement for more than 10 years. I agree to the terms of use and privacy notice in Money and consent to the processing of my personal information.

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The information provided here is accurate as of the published date.