Investor's Business Daily recently featured David A. Schneider, CFP®, president of Schneider Wealth Strategies, in its article "Why Your $1 Million 401(k) May Be Worth Far Less Than You Think." The article explores how taxes can materially reduce the after-tax value of traditional retirement accounts and why retirement-income planning requires more than simply focusing on account balances.

Mr. Schneider explained:

"One million dollars in a 401(k) isn't really worth a million dollars."

He elaborated further:

"The 401(k) is a $1 million asset with a $320,000 liability attached to it. Only $680,000 of that is really yours to keep, since you can't access any of your traditional 401(k) without triggering a taxable event."

The article also examined Roth conversion strategies and the importance of managing taxes throughout retirement. Mr. Schneider noted that the years between retirement and the beginning of Social Security or required minimum distributions may provide an opportunity for lower-tax Roth conversions.

He also warned about unintended consequences tied to Medicare premiums:

"If you do a big Roth conversion when you're 63, you could be faced with higher Medicare premiums in that first year when you take Medicare."

Addressing the psychological transition from saving to spending in retirement, Mr. Schneider observed:

"It is a huge shift in psychology, and it's very difficult for a lot of people. They think they're doing something wrong or irresponsible. They're scolding themselves because they don't think that they should be taking money out. I have to remind them that that's why they've spent a whole life saving."

Finally, he discussed the importance of maintaining flexibility in retirement planning:

"If you're real estate rich (and own multiple properties) but cash poor, then sell one of those properties, or maybe you rent it out for rental income. Maybe you'll have to do that, maybe you won't. But it's a nice option to have. It's always good to have an escape hatch."

The article underscores that retirement planning is not just about accumulating assets, but also understanding taxes, withdrawal strategies, and long-term cash-flow management.

🔗 Read the full article here:
https://www.investors.com/etfs-and-funds/personal-finance/retirement-million-401k-may-be-worth-far-less-than-you-think/