“When is the second best time to pay your taxes?”
Many of our clients have retirement accounts, such as an IRA, 401(k) or a 403(b). These accounts take careful planning. Why? Because the accounts typically have never been taxed, and how you plan for them will determine how and when your family will have to pay the taxes on them. That planning often involves the SECOND BEST time to pay taxes.
You may be wondering at this point, “when is THE BEST time to pay your taxes?” Well that would be NEVER, right? If you can avoid taxes altogether, that would be great. But if you can’t avoid it altogether, then the next best time is…
LATER. Not today, but at some later date. Maybe in a few months, or a few years, or a few decades. This is one situation where it pays to procrastinate because the money continues to grow while you wait. (And in many cases you’re waiting years or decades.) So, the longer we put off paying the tax, the better off we are. On the other hand, if your family has to pay the tax immediately after your death, that is the worst case scenario. Good planning will help your family avoid that worst case scenario. Good planning will help your family avoid that worst case scenario and pay the IRA taxes LATER instead of immediately.
To read more about IRAs, click here.