When you’re preparing to retire, the last thing you want is to realize that the money you have in the bank may not last quite as long as you initially planned.

Unfortunately, this happens all too often, even to people who were proactive about saving from an early age.

Many of us are told to get a job with a steady paycheck, and start putting away money for the future in a 401(k) or IRA. And as an added bonus, we get to pay less income taxes — or so we might think.  

401(k)s, IRAs, and Taxes

When you put money into a qualified plan like an IRA or 401(k), that money is “tax deferred,” meaning that you don’t have to pay taxes on it, or on the returns it generates, right away. 

This remains true for as long as the money stays in the account, but when you withdraw money, you have to pay income taxes. As a result, the number you see in your account balance is significantly higher than the amount you’ll be able to have in your pocket. 

If you forget to plan for these deferred taxes, or you underestimate how much you’ll owe, you’ll likely find yourself having to choose between lowering your standard of living or postponing your retirement. This is especially frustrating, because the better your IRA or 401(k) performs, the more taxes you will have to pay. 

Fortunately, if you’re an Accredited Investor, there are other ways to build wealth during your working years, and to generate passive income during retirement so that you aren’t only relying on qualified funds.

How Tax Efficient Investing Can Save Your Retirement

Whether you’re early in your career, you hope to retire in a few years, or you’re a retiree looking to supplement your savings with new income, investing in tax efficient, cash flowing assets can offer the solution you’re looking for.

To start, take a look at your whole investment portfolio, not just your 401(k) and IRA. Different asset types, funds and accounts are taxed at different rates, so diversification can help you make the most of your opportunities and build the most tax efficient investment strategy possible. 

In particular, Accredited Investors can make direct investments in companies and a variety of other assets, which allows you to take advantage of additional tax benefits that aren’t available when you only invest in stocks or qualified plans. 

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