NEW YORK (MainStreet) Despite the fact that 88% of investors feel confident about having enough money to live the lifestyle they want in retirement, their fears loom large, according to a new Legg Mason study.
- Gen X Must Step Up Its Retirement Savings
- Two-Thirds of Gen Y Would Change Jobs for Better Retirement Benefits
- Retiring And No Debt Is the American Dream, Consumers Say
- Maximizing Social Security Benefits May Hinge on a Temporary Reverse Mortgage
- Public Policy Changes That Could Derail Your Retirement Plan
"Variables that can help bridge the gap are finding new ways to increase income and savings as well as reduce costs both now and in retirement," said Catherine Collinson, president of Transamerica Center for Retirement Studies (TCRS).
"Given the significant drag taxes can have on a portfolio, it is critical that investors understand the tax efficiency of their portfolio," said Duncan Rolph, partner and managing director with Miracle Mile Advisors. "There may be some investments with high expected returns but are very tax inefficient, such as taxable credit strategies, corporate bonds, hedge funds and other actively managed accounts with short-term trading."
Early withdrawals are also subject to taxes, and for those under 59.5 years old, a 10% penalty applies in most cases.
"Avoiding loans and early withdrawals from retirement accounts is one of the most important things investors can do to preserve their retirement savings," Collinson told MainStreet. "Simply put, loans and early withdrawals can severely inhibit the growth of long-term savings."