Commentary: Retirement Account Balances Hit Two-Year High

Yeah, interesting headline came across my eyes here. The retirement account balances hit their highest level since 2021. So Americans retirement account balances are at their highest level in more than two years.

That’s in the quarter 120 24 retirement analysis released last week. Average 401k savings at a record high of 14.2% in the first three months of the year, while the average balance increased 6% to 125,000.

Almost 126,000, actually. Both employee and employer savings rates match previous record levels of 9.4% and 4.8%,

respectively. IRA balances increased 10% in the quarter. For 403, balances rose 7%.

Shana, what does this mean for us both for those of us already in retirement, as well as those like me who are in the process of saving for retirement? Thoughts? Well, I think a good bit of that is attributable to how well the market’s done. We’ve been in a bull market since the summer of last year, so we’ve seen balances really on the rise. I think it’s good that we’re still seeing high rates of savings in retirement accounts, or I won’t say in retirement accounts.

I think, I think the rate of savings, seeing a high rate of savings is good because people are going to need it if inflation continues at the same rate that it’s been. But this is almost a little bit troubling for me simply because of taxes. So what it means that we have higher balances in our IRA accounts is that we have more money for the government to tax at some point in the future.

So you hear me say very often that I believe taxes are going to be higher in the future than what they are today. The reason that I believe that are for reasons that we talk about often on the show, you know, there is out of control government spending on both sides of the aisle. We have come to a place where we’re spending almost a trillion dollars a year just to service our debt, money that we’ve spent that we didn’t have, that we had to borrow and print.

And that trend is not changing, unfortunately. Now it needs to, and it should. And we, the people should be putting some serious pressure on those in Washington to get this spending under control and to kick out those who won’t do it.
But what’s going to happen? So at the end of 2025, the current tax structure is set to revert to what it was before the Trump tax plan got put into place in 2018. And so what is that going to mean? That already will mean higher taxes. So if we don’t have a change in philosophy for those coming into office during the next election, we’re going to have to have higher taxes.

The government doesn’t make money. The government only appropriates money. 
We, the people have given those in Congress the right to spend money, to choose what to spend money on, and the right to collect that from us in the form of taxes.

And when you put money into a pre tax account and that money grows, like we’re seeing that it, that it has, it’s not only growing for the owner of that account, you and I and whoever has a 401K account, but it’s also growing for the government. We’re growing our future tax liability. So we say it very often in the show that you should be diversifying the types of accounts that you have.

Now it’s okay to have some money in a tax deferred account because I guess maybe there’s some slight possibility that you’ll be able to pay lower taxes in the future. For example, if the qualified charitable distribution law stays intact, where when you’re 70 and a half, you can give money out of your ira without paying taxes on it. Now, you know, that’s a good, a good way to plan for your future giving, to grow that giving and then to be able to get it out tax free.

But if you’re one of those people who has the majority of your savings in a tax deferred account, you need to start thinking twice about how you’re diversifying.

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