Taxes just seem to be going up. Even though widespread layoffs are happening, individuals saw their retirement account balances plunge by 25 percent last year, and the economic outlook for 2023 appears pretty dismal.
Amazon rang in the New Year with the announcement it will be cutting another 18,000 jobs. Fidelity reports that IRA balances crashed by 25% as of November due to stock market volatility. Yet, inflation rages on, along with more and higher taxes.
With the job market looking leaner and scarier than ever, and savings and investments being evaporated, even Bill Gates recently had to list his daughter’s NYC condo for a quarter of a million dollars less than he paid for it. It could well sell for even far less than that.
What can you do to keep a roof over your head, stop the losses, and avoid being bankrupted by taxes?
3 Moves To Protect Your Savings And Retirement Nest Egg
1. Roll Over To Self-Directed Accounts
You can roll over your 401k and IRA to self-directed versions of these accounts. If your money managers are losing a quarter of your savings each year, you probably can’t do too much worse. You don’t have to take a penalty to do this. You can then put your money in a wider variety of safer or better performing investments.
2. Tap Into Or Cash Out Your Retirement Account With Care
It is very costly to cash out or tap into your retirement savings accounts in most cases. Usually the long term costs make it a poor financial move. Do it with care, and only after doing all of the math.
However, you can use some of these funds without penalty in certain circumstances. Such as buying your first home, or in a hardship situation.
If you need access to more cash to cover bills after a medical emergency, or you need to save your home by keeping your property taxes up to date, then it may make a lot of sense. Especially if your account is just losing money anyway. At least you’ll then have a place to live in retirement.
This may also be wise for getting ahead of some funds cutting off withdrawals. Just as we recently saw FTX collapse due to investors trying to access their funds, now BlackRock, the world’s largest asset manager, with $10T under management has begun blocking withdrawals. At least from one $3.5B property fund.
3. Maximize Contributions
With so many new taxes, and rising taxes, contributing to tax saving, and tax deferring accounts can still provide essential financial help.
If you can afford it, continue to max out your contributions before tax filing deadlines this year. Just remember that you don’t have to invest that money in the stock market, where you may lose most of it.
Lower Your Property Taxes
Before you tap into your 401k or IRA to pay your property tax bill, know that you quite likely can just get your bill reduced with the help of Property Tax Adjusters, Ltd.
Appeal your tax assessment and bill first. You may owe a lot less than you think.
This can both help you hold onto your home long term, more affordably, as well as to make it more attractive to buyers if you must sell.