Madden Mischief

Paying taxes on your retirement accounts, while in retirement defies common sense!

Isn’t it in the taxpayers’ best interest to pay taxes on their contributions to retirement accounts prior to retirement?  Isn’t that when they’re relatively smaller, easier to pay and would make more sense, says the noted Certified Financial Planner Nancy Hite. 

Hite, a CFP®, fiduciary, author and founder of The Strategic Wealth Advisor, advocates giving taxpayers more options since having to pay taxes on retirement accounts while retired is not only unfair, but contrary to common sense. 

For most seniors, paying taxes annually on contributions to Roth accounts while still working helps avoid a bigger tax bite later when retired.  Roth retirement accounts enable retirees to take some or all the money out of their Roth accounts tax-free.  This helps ensure that more seniors and retirees will be done paying taxes and have the funds they need to enjoy a long and happy tax-free retirement.

President Trump, please consider what Hite’s proposing here that would not only be in the taxpayer’s best interest, but would also greatly benefit your pal, the Federal government! 

Hite is appealing directly to you, Mr. President, to expand Roth‑style retirement options to all retirement plans, including pension plans.  This will provide taxpayers with the ability to pay taxes now “on the seeds” of their retirement savings rather than on having to pay taxes on the much larger “harvest” when they retire.  She’s long argued that it’s far better to “pay taxes on the seeds, not on the harvest®.”

Many Americans would love to have a Roth retirement plan option for all their retirement accounts and are frustrated they don’t have the ability to make Roth contributions to those accounts.  So, please President Trump, that must change, for both the taxpayers’ sake and to help ease the Federal government’s catastrophic indebtedness.

Hite calls it a choice between paying tax annually on “the seeds” or waiting to pay tax on the total accumulated savings and investments, “the harvest.”  This “Rothification” strategy is rooted in a simple, yet powerful seeds vs harvest principal Hite has championed over the years. 

For everyday Americans, this strategy would mean that when workers voluntarily choose to make Roth contributions, they’ll pay taxes now rather than decades down the road when the accounts are much larger. That shift alone could benefit not just them but generate hundreds of billions of dollars in immediate federal revenue, reducing the national debt without raising tax rates.  At a time when fiscal pressures are mounting, this is a practical, common-sense solution to many of our nation’s woes unless, of course, a “common-sense paralysis” has set in.

Hite believes Americans deserve a retirement system that gives them more control and less worry and uncertainty.   The increased immediate revenue from Roth contribution taxes could not only reduce our astronautic national debt but embrace a value Americans cherish:  personal choice.

For decades, Americans have been told that if they saved consistently and worked hard, in retirement they would have financial stability and peace of mind.  However, due to the near extinction of pension plans, except for government workers, and due to continued inflation and other factors, that promise has become broken.

Hite believes what really could Make Retirement Plans Great Again (MRPGA) is giving all Americans an option for not paying taxes while in retirement on their retirement plan savings.  She also believes no one should be forced into a Roth account.  “Americans deserve the freedom to decide how and when they want to pay taxes on their own retirement savings,” she said.  Hite also supports allowing employer matches to be made as Roth contributions, a change that would empower workers and generate additional revenue without burdening taxpayers.

Today, that promise of a financially secure happy retirement seems like the title of her book “The Retirement Mirage.”  In working with her financial planning clients across Florida and other states, Hite hears them expressing fear, frustration and worry whether the Social Security system they’ve paid into for their entire lives will be there when they need it most at the end of their work careers.    She also hears their fears about having their retirement savings devastated by taxes when they withdraw funds.

Roth retirement accounts allow retirees to enjoy tax‑free retirement income which provides them with more financial stability while at the same time reducing their dependence on Social Security. With the Social Security program facing long‑term funding challenges, Hite says we must strengthen non-government retirement programs to help seniors be more financially independent.

At a time when many Americans are living in economic anxiety, and when families are tightening budgets and postponing retirement, we need to give all working Americans the ability to have a Roth option on every retirement account they have. Hite believes that expanding Roth options will enable millions of Americans to enjoy peace of mind in having a financially secure retirement. 

Hite believes as I do, that retirement planning should provide many options, including the Roth option.  This will give Americans financial control and retirement dignity with the ability to build a future source of tax-free retirement income they can count on.

Tom Madden is CEO and his daughter Adrienne Mazzone president of the celebrated PR firm TransMedia Group.