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Pluses and Minuses Of Pre-, After-Tax Savings

By JOEL FRANK
Posted 4/22/19

Would you rather have a whole lot of money that will first be taxed (Federal and possibly state) when you withdraw it or a whole lot of money that will be tax-free when you withdraw it? Would you rather have a whole lot of money that is taxable to your heirs, upon your death, or a whole lot of money that is tax-free to your heirs?

Career civil service workers are the last major group of employees that still have a guaranteed Defined Benefit pension. Coupled with Social Security, your retirement income will roughly be 90-100 percent of your pre-retirement income. This guaranteed income, however, is also guaranteed to be eroded by inflation and longevity. One sure way to address inflation and longevity risk during retirement is to save a whole lot of money while still working.

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