The more income individuals earn, the more individuals need to save and invest to have a chance of maintaining their lifestyle in retirement.
A person’s savings rate is likely the number one factor in their ability to achieve their financial and retirement goals. Individuals must understand that it is not market returns, and not the economy…it’s a person’s savings rate.
Higher income earners often don’t increase their savings rate proportionately as their income goes up. They often spend more and more.
Formulas drive taxes. Once retired, certain types of income will impact items beyond your marginal rate; things like your capital gains and qualified dividend tax rate, the amount of your Social Security that is taxed, the premium you pay for Medicare Part B & D, the Net Investment Income Tax, and whether you qualify for the health care premium tax credit.
When you have a pile of money in pretax accounts, every dollar you withdraw goes into these formulas, and can cause you to pay more tax or premiums in other areas. Roth withdrawals don’t count in these tax formulas.
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