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    Retire Tax Free
    Retire Tax Free
    Retire Tax Free
    Ebook172 pages2 hours

    Retire Tax Free

    By Jim Jorgensen

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    About this ebook

    Today can change your life! Retire Tax Free is the first book to outline how you could lose 40% or more of the money you withdraw from your IRA, 401(k) and pension once retired due to taxation. Unless you understand earnings tests, means tests and income tax traps, your Social Security retirement check could be reduced or even eliminated. Plan to Retire Tax Free now, before it’s too late!

    LanguageEnglish
    PublisherJim Jorgensen
    Release dateJan 30, 2012
    ISBN9781465978158
    Retire Tax Free
    Author

    Jim Jorgensen

    Jim Jorgensen is the author of six books on personal finance, including The Graying of America, and is cohost of the nationally syndicated radio show It's Your Money. He is a frequent speaker at conventions and meetings and lives in the San Francisco Bay Area.

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      Book preview

      Retire Tax Free - Jim Jorgensen

      ~ * ~ * ~ * ~

      RETIRE TAX FREE

      Avoid the IRA Tax Trap

      And Win the Retirement Game

      Jim Jorgensen

      ~ * ~ * ~ * ~

      Smashwords Edition

      RETIRE TAX FREE

      Copyright © 2015 James Jorgensen

      Cover Design by Laura Shinn Designs

      http://laurashinn.yolasite.com

      Smashwords License Notes

      As rights reserved. Except as permitted under the Copyright Act if 1976, no part of this publication may be reproduced, recorded, transmitted or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the author.

      While a great deal of care has been made to provide accurate and current information, the ideas, suggestions, general principals and conclusions presented in this text are subject to local, state and federal tax laws and regulations, court cases and any revisions. The reader is thus urged to consult legal counsel regarding any points of law – this publication should not be used as a substitute for competent legal advice or other professional advice.

      Because of the dynamic nature of the Internet, any Web addresses or links contained in this book and any tax examples may have changed since publication and may no longer be valid.

      ~ * ~ * ~ * ~

      Other books by Jim Jorgensen

      Non-fiction

      The Graying of America

      Your Retirement Income

      How to Stay Ahead in the Money Game

      How to Make IRAs Work for You

      MoneyShock

      Money Lessons for a Lifetime

      It’s Never Too Late To Get Rich

      Fiction

      Blind Will

      ~ * ~ * ~ * ~

      REVIEW

      This well-researched book should be a must-read for all those contemplating retirement. While a bit technical, the data is accurate. The book presents a sobering look at the state of public and private pensions, Social Security and what the individual should do to maximize his/her opportunity for a quality retirement.

      —J. Rush Vann, Investment Management/Texas Monthly Five Star Wealth Manager

      ~ * ~ * ~ * ~

      CONTENTS

      Introduction

      CHAPTER 1: Let’s Do The Numbers

      CHAPTER 2: Collapse Of The Three-Legged Stool

      CHAPTER 3: Goodbye, Company Pensions

      CHAPTER 4: Hello, Money Purchase Plans

      CHAPTER 5: How To Win The Matching Dance

      CHAPTER 6: How Social Security Began

      CHAPTER 7: How Retirement Benefits Disappear

      CHAPTER 8: Why Is Social Security In Trouble?

      CHAPTER 9: What Should You Expect From Social Security?

      CHAPTER 10: The IRA Tax Trap

      CHAPTER 11: You’re On Your Own, Baby

      CHAPTER 12: A New Awakening

      CHAPTER 13: The Future Of Retirement Plans

      About the Author

      ~ * ~ * ~ * ~

      Introduction

      In our father’s generation retirement meant a company-paid pension and Social Security. But most retirees today live off a combination of Social Security, an employer’s 401(k) plan and other savings like an IRA. But over the next few years that will change. Millions of future retirees will try to get by with benefits based on their past contributions to employer-based retirement plans, any employer matching money they could earn, what Social Security benefits they can collect, and personal savings they could put aside. Then they could face the prospect of supporting older parents whose cost of care can increase quickly as they become frail and require nursing home care. As a result, an increasing number of people will be forced to go back to work.

      Not only will they need the money, but within five years of retirement the dollars they receive from reduced benefits can shrink in purchasing power at the local grocery store. But, if they retire early and go back to work before normal retirement age they could lose a big chuck of their Social Security benefits from the possible earnings limits expected to be set for collecting benefits.

      Here’s the shocking number of people continuing to work:

      Sources: the Bureau of Labor Statistics

      What all this tells us is future retirees face a triple whammy: reduced savings by employer and employee, a lack of any adequate retirement nest egg, and the loss of earned benefits in retirement.

      How do I know this?

      Check out these scary statistics from the 2014 Retirement Confidence Survey published by the Employee Benefit Research Institute:

      1) Only 64 percent of American workers have saved for retirement, down from 75 percent in 2009.

      2) Of those who have saved 36 percent have socked away less than $1,000 and 60 percent have less than $25,000 already saved.

      The reason most people don’t save for retirement comes from a January 2015 report, The Precarious State of Family Balance Sheets, from the Pew Charitable Trusts.

      3) More than half of American households have less than one month of income available in ready accessible savings.

      4) Even if they tapped all available resources, including retirement accounts and investments, the typical middle-income family can replace just four months of income.

      Now you know why most people grab Social Security retirement benefits as soon as they are available, and why these benefits make up a majority of the money they spend in retirement.

      We as a nation have never faced a situation like this in our history. As a result, older Americans are increasingly going to be induced to remain in harness far longer than anyone planning retirement in their forties or fifties today ever dreamed possible. If you’re not yet 40 use this information to anticipate the future and make your plans accordingly.

      I have not based my gloomy assessment on a series of assumptions on how we'll retire in the future. What I'm forecasting is the fundamental economic consequence of each of us saving less, living longer, and at the same time Social Security and employer retirement benefits shrinking.

      On a more personal note, this book is about the IRA Tax Trap and how Congress has induced millions of workers to avoid income taxes on the money they save for retirement. Once retired, however, they face a nasty surprise. As you’ll see in this book, their withdrawals not only face ordinary income taxes, but mean tests and increased monthly Medicare Part B and Part D premiums based on reportable taxable income. Maybe that’s why a growing number of retirees now find that when they make withdrawals from their IRAs, 401(k) s and pensions as much as half the money they’ve saved over the years can disappear. And the outrage continues over Congress making plans to extend the age for Social Security retirement benefits and possibly eliminating the retirement check for higher-income retirees. You now have a clear choice:

      * * * * *

      Take a tax deduction for your retirement savings and later pay

      the taxes and face means test in retirement, or pay the taxes

      when you save and keep all your money in retirement.

      * * * * *

      Most of all I’ve tried to incorporate in this book ways to help you recognize the difference between simply stashing cash in a handy tax-deductible IRA or 401(k) instead of first paying taxes on the money.

      As you save for retirement never forget this message:

      * * * * *

      Once you delay taxes the government controls everything

      you do and how much you pay to receive the money back.

      * * * * *

      I gave early pre-publication copies of this book to my employees and radio listeners because I was eager to explain ways to bring success in their financial lives and, for the first time, imagine themselves planning for withdrawing their money in retirement tax-free.

      I hope each time you read this book you’ll find something new and useful for yourself, your loved ones and your friends. I’m glad that I can share what I’ve learned and I wish you well as you build your financial future.

      By the time this book appears, some of the material may be out of date. I have tried to keep the book as current as possible, fully recognizing that our nation's entire retirement system and tax code is resting on a sea of shifting sand and I might fail in this attempt. I make no claim to infallibility. In addition, to concentrate on the important points, I have purposely left out much of the detailed material that supports many of the conclusions made in this book. I believe that principles and ideas should be easy to understand so that you may not only discover what is happening today, but also visualize how these developments may affect your future.

      What you read in the following chapters may be shocking, and frankly, a little scary. It may also make some of you angry at the way Congress has run off with our payroll taxes and reduced our retirement benefits. Chances are it’s also something not talked about outside the Washington beltway.

      Many of you may not agree with every conclusion I reach. The future is cloudy at best. But consider this: If I am wrong, nothing in this book will hurt you. If I am right, and you become more aware of the retirement income shortfall you could face, and that creates the willingness to understand your retirement plans and the need to save more to provide for your own retirement income, I know the book will have fulfilled its purpose.

      My vision of the future has us working together, learning how we can best take advantage of the opportunities from our employer and our government, and in the end how we can be responsible for our own financial security in the future. The stakes are high, not only for our families and ourselves but for the millions of Americans who have already retired into a world of inflation and shaky pension plans.

      Books are rarely written alone. I would like to thank my son Richard Jorgensen, a co-host on my nationally syndicated radio program and who for years has unselfishly offered advice and inspiration when it was needed most.

      But most of all, I would like to dedicate this book to my children and grandchildren. They are making their own way in our marvelous country surrounded by all the freedoms we hold so dear. But as they build their own lives I am concerned about the economic problems I see coming. They will have to live in a world beset by those problems, many of them of my making. I hope and pray that the legacy I leave my children will not include economic problems that I created but failed to solve. I know America will survive.

      Jim Jorgensen

      San Francisco, California

      ~ * ~ * ~ * ~

      CHAPTER 1:

      Let’s Do The Numbers

      When I wrote The Graying of America thirty years ago I based my predictions of the nation’s failing pension system on four basic trends:

      1) Increased life span

      2) Rising salaries to meet the cost of living

      3) Decreased retirement

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