Are you prepared for retirement? Most of us would like to think so but the majority of us are not financial professionals and have simply followed the retirement advice of those around us.  We are told to put our money into 401(k)s, IRAs, 403(b)s, TSPs, etc. to reap the benefits of tax deferral and to just trust the system. Is it that simple? Not necessarily, especially if you wind up in a different tax bracket later on in life or overall level of taxes rises for everyone, and given the historically low level of taxes we now have it seems likely to be taxed at a higher level later in life.

Consider today's retiree or soon-to-be retiree. A middle-class married couple making $65,000 per year is currently in the 15 percent bracket. If this couple is currently contributing to their 401(k), in essence they are deferring the payment of taxes at a 15 percent rate. In only five short months (under current law) they will be in a 28 percent bracket, almost double their current rate. If they plan to retire in 2013 and intend to live off of Social Security, a pension, or investment income they will actually be in a higher tax bracket, reports Daily Finance.

Daily Finance continues with advice for people on both ends of the retirement spectrum:

I'm Young & Far From Retirement, What Can I Do?

• Maximize your Roth IRA/Roth 401(k) contributions this year and then switch to tax-deferred accounts once tax rates increase (2013 under current legislation).
• Retirement savers age 30-45, take some of the money your contributing to your 401(k) and parlay it into a "tax-free retirement" by buying an inexpensive "Second to Die" life insurance policy on your parents (with a return of premium benefit). This strategy (which admittedly may draw some controversy) may provide you with a significant tax-free lump sum at or near retirement.
• The two most critical factors to making money in the markets are: Risk management and true diversification. Get comfortable with these terms. Risk management means cut your losses short and let your profits run. True diversification means investing in truly different un-correlated asset classes. If all you own is mutual funds you'll do well when the market goes up, but you'll get killed when the market goes down.

I'm Retiring, What Can I Do?

• Convert to a tax-free Roth while tax rates are ultra-low. If you're wrong you get a "do-over" because you can always convert back by next October (using a process called a Roth recharacterization).
• Book your gains this year while the capital gains tax is low.
• Look for appropriate investment tax shelters in 2013 like NREs - Natural Resource Exploration investments (though, as always, consider investment risks and fees).
• Look for higher-yielding investments in order to generate more income offsetting the higher tax bill.
• Higher income earners: Consider bunching your deductions this year (combine your deductions for 2012 and 2013 into this year's tax bill because your deductions may get phased out in 2013).

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