The fact that people are living longer than they used to has prompted many U.S. workers to change how they think about saving and investing for their retirement years.
Personal finance author and philanthropist Tony Robbins recognizes this shift in reality and suggests a key retirement strategy regarding 401(k)s and Individual Retirement Accounts (IRAs) to help make the challenge of living longer a circumstance to be welcomed as good news.
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Simply hoping that Social Security benefits will be enough to provide one with a financially comfortable retirement is not a recommended approach. And this is even more the case when considering how longer lifespans will extend the length of many Americans' post-work experiences.
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Fifty years ago, Robbins explains, an average retirement could be expected to last about 12 years. Today it is very often more than 20.
In addition, the Center for Retirement Research reports that 49% of U.S. households are at risk of having too little money in retirement to allow them to hold onto their current standard of living.
Robbins recommends that, during their working years, people take a good look at their 401(k) and IRA opportunities and make some financially smart decisions based on what they see.
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Tony Robbins warns U.S. workers about a key 401(k) fact
Robbins offers a word of caution to anyone investing for retirement: Be aware that taxes are likely to increase between now and when you retire.
The important fact to know, however, is that there is a way to take this reality and use it to your advantage.
If a person's employer matches their 401(k) contributions, Robbins recommends workers take advantage of those matches to the fullest extent they can.
And if that employee can opt for a Roth 401(k), the motivational speaker urges them to do exactly that. That's because, assuming their taxes will be higher during their retirement years, it's better to pay them at a lower rate now.
Once a person has done that, their Roth IRA allows them to make tax-free withdrawals after they retire.
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Robbins explains a couple reasons, against the conventional wisdom, that people can often expect to have a higher tax rate when they retire. This is the case even though people expect to be earning less in retirement and therefore be in a lower tax bracket.
"In reality," Robbins wrote in his book Money: Master the Game, "Our home is often paid off (so we don't have any mortgage deductions), and the kids are long gone (so we don't have any dependents)."
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Tony Robbins explains a major IRA strategy
For similar tax-advantage reasons, Robbins suggests setting up a Roth IRA instead of a traditional IRA. Taxes on Roth IRA contributions are paid up front and withdrawals are made tax free after one retires.
The maximum contribution to a Roth IRA in 2025 is $7,000 for those under 50 years old, and $8,000 for those 50 or older.
In addition, it's important to know that one can only fully contribute to a Roth IRA if one's modified adjusted gross income (MAGI) is under $150,000 for a single filer and under $236,000 for those who are married and filing jointly.
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Robbins also recommends, when a person has the opportunity, converting a traditional IRA they might already have to a Roth IRA.
You will be required to pay a significant amount of money in taxes when making the conversion, but Robbins believes that expense is worth it in the long term.
"Some people cringe at the idea of paying tax today because they view it as 'their' money," Robbins wrote. "It's not. It's the government's. By paying the tax today, you are giving Uncle Sam his money back earlier."
"And by doing so, you are protecting yourself and your nest egg from taxes being higher in the future."
