The Deferral Tax Trap!
Do you really want all your liquid assets in your
403(b) / 457 and IRA?

Are your sure how it will be taxed years hence?

Over time most families could end up with nearly all their financial assets in tax-deferred accounts.  All that deferral works wonders if you or your heirs withdraw money decades hence at the same or a lower rate than you would have originally paid.

But federal taxes on salary and other ordinary income are comparatively low now.  The top marginal rate is just 35%; considering the current budget deficits and the coming bulge of retirees who will run up Medicare and Social Security costs, it seems likely taxes will climb....every penny you eventually take from a pretax 401(k) or 403(b) or a deductible IRA is taxed at the much higher ordinary income rate.

Three years ago Boston University economics professors did some controversial calculations showing that couples earning $50,000 stood to raise their lifetime tax burden by contributing to 401(k)s and 403(b)s, and IRAs in part because of the way Social Security is taxed:

"...even people with $100,000 in income might do better saving outside a 401(k)"

It sounds like heresy to workers who have been unremittingly lectured for the past two decades to save more in the IRAs and 401(k)s, but the truth is that there is such a thing as too much tax deferral.