by John Mitchel
Mayor Giambrone and the rest of City Council want us to believe the City Income Tax does not affect our 401k’s, 403b’s and other retirement plans. Nothing could be further from the truth; just ask Albert Einstein, who some say believed “compound interest or time-value-of-money (TVM) is the most powerful force in the universe.”
To explain, although retirement savings are not taxed by the City when they come out of your retirement plan, they are taxed before they go in, and that’s the worst time for two reasons. First, the 1.5% is paid on 100 percent of earnings, so you’re actually paying City Income Tax on top of Federal income tax.
Second, depending on your age when you start contributing to a qualified retirement plan, you could be losing decades of compounded growth on a tax deferred basis. Even assuming a conservative 5% annual rate of return, that 1.5% taken out of your paycheck month in month out for decades could add up to tens of thousands of dollars.
If you do anything before the May 7th election, take this letter to your financial advisor, and if she disagrees, find a new financial advisor.