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those putting it away at 25% there are bigger challenges to make sure that you are able to take it out without paying higher taxes down the road.

I am not an economist and cannot warrant which way taxes will go, however, there are some ideas that I would share with you that should at least be food for thought.

Taxes are lower than the have been for decades.
The work force will be shrinking as the baby-boomers retire and therefore there are fewer workers to tax.
The entitlement needs will increase as the baby-boomers retire
There is a new arm of government call the department of homeland security that costs a fortune
There is a new drug program for seniors $500,000,000,000 and counting
There is a very expensive war on terror that will not soon be won and it is very costly

If all these added expenses and shrinking tax base continue to blossom, I think higher taxes are a real possibility. Add these issues to the fact that we have representatives in Washington that have very little restrain about continuing to spend our citizen’s money the future could hold tremendous tax increases. A strong case could be made against tax deferred investing or at the very least diversifying between tax deferred and taxable investments. The Roth by the way is the best of all worlds. The question is how long before our boys in Washington decide that they are not getting their “fair share”.

For a long time people have had put all of their money in their retirement plans. Today that is probably not such a great idea, especially if you have invested mostly in your company stock. Imagine the Enron employee that lost his job, pension, and stock all on the same day.

Further tax deferred annuities can be a great place to put money depending on a whole bunch of tax questions. However it is an awful place to put money that you never plan on touching. There must be a valid reason to use any investment vehicle. Make sure you ask your rep to explain why he is suggesting the vehicle that he is using over another one.

An exit strategy is very important for anyone that has a large portion of their estate in qualified plans or tax deferred investments. An exit strategy will give you a way to get out of the plan or investment in the best way possible with the least amount of real impact possible. Each case is different. Speak to your financial advisor about the exit strategy. If they don’t know what you are talking about ask them what is the best way for you to use the money you want to use, leave as much of the money as possible to your heirs and pay the least amount of taxes possible. If they still don’t know what you are talking about, it might be time to look for a new advisor.

Steve Lover is president of Senior Strategies a firm that helps seniors make better decision with their money. Visit their website www. seniorstrategies.org

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