Advantages Offered By Tax-Deferred Retirement Plans
Your contributions to a qualified tax-sheltered plan are not subject to federal, state, and local taxes.
No income taxes are due on the gains on the invested assets until they have been withdrawn.
Withdrawals are subject to income taxes at your marginal tax rate, which in retirement may be lower than your tax rate today.
Other retirement income, such as from Social Security, pensions, employment, interest, dividends and capital gains, is subject to income taxes.
To keep income taxes down in retirement when making withdrawals, take money out of taxable accounts first, followed by tax-deferred accounts, and finally Roth IRA accounts.
When you die, any eligible beneficiary may choose to roll your 401(k) and IRA assets into an IRA tax-free.
The likelihood of you paying federal estates taxes is just about zero.
Switch Bad Habits Into Good Ones
Do This Instead!
Save early and regularly
Accept risk knowing that you have time to ride out the stock market’s highs and lows
Contribute to a Roth IRA to supplement your employer-sponsored plans if necessary, to reach your calculated retirement savings goal
Keep your hands totally off your retirement money
Go online and create a will and revise, when necessary
Do You Do This?
Put off saving for retirement
Avoid risk when saving for retirement
When planning for retirement, depend only on the strategy of your employer
Withdraw or borrow money from your retirement accounts when money is desired for other reasons
Put off writing your will