Uncle Sam and Your Retirement-Taxes on Retirement Savings

Many Americans will be shocked once they reach retirement, to find that their IRA or 401(k) is not worth nearly as much as they think. Alicia Munnell, PhD, economist, Director of the Center for Retirement Research at Boston College, Peter F. Drucker Professor of Management Sciences at Boston College's Carroll School of Management said many upper income retirees will be hit with 25-32% federal tax bills on the funds they saved for retirement, and possibly even more from state taxes. She noted that those who save in tax-deferred retirement plans still come out ahead, even after paying taxes on the withdrawals.