What Is The Double Dilemma?
While taxes are likely going to be the largest “fee” you pay in retirement, there is another very serious problem lurking in your retirement plan strategy…sequence of return risk. This is potentially an even bigger problem than the tax liability you may face in retirement, but when you combine this risk with the taxes payable on an IRA, 401(k), 403(b) or any other taxable asset which is needed to secure your retirement, the dilemma is real and the risk is huge.
You may not hear much about the double dilemma from your investment advisor, and for good reason.
If you have ever had a conversation with your broker or advisor during either a market down turn or even when the market is up, you may have discussed either “unrealized losses” or “unrealized gains”. What this means is unless you sell out of your portfolio, you have neither realized or “taken” the loss or the gain. While you are saving for retirement, this is usually not a problem. In fact many investment advisors and experts will suggest you buy when the market is down and, of course, sell when the market is up. There’s a problem, though. When you are forced to sell shares either because you need income when the market is down, or because of a Required Minimum Distribution after age 70 1/2, the combination of market losses and income tax liability can be devastating.
Contact us today to find out more and how you can protect yourself from the Double Dilemma.