Take advantage of tax-advantaged accounts
One of the best ways to accumulate funds for retirement, or any other investment objective, is to use tax-advantaged (*i.e., tax deferred or tax free) savings vehicles. Though tax considerations shouldn’t be your only investing concern, by putting your money in tax-advantaged savings vehicles and investments when appropriate, you’ll keep more money in your own pocket and put less in Uncle Sam’s.
Anyone under 70½ who earns income or is married to someone with earned income can contribute to an IRA. Depending upon your income and whether you’re covered by an employer-sponsored plan, you may or may not be able to deduct your contributions to a traditional IRA, but your contributions always grow tax deferred. However, you’ll owe income taxes when you make a withdrawal. You can contribute up to $6,000 in 2019 to a traditional IRA, and individuals age 50 and older can contribute an additional $1,000.
Roth IRAs are only open to individuals with incomes below certain limits. Your contributions are made with after-tax dollars but will grow tax deferred, and qualified distributions will be tax free when you withdraw them. The amount you can contribute is the same as for traditional IRAs.
Employer-sponsored plans (401(k)s, 403(b)s, 457 plans)
Contributions to these types of plans grow tax deferred, but you’ll owe income taxes when you make a withdrawal. You can contribute up to $19,000 in 2019 to one of these plans and individuals age 50 and older can contribute an additional $6,000. Some employers allow employees to make after tax Roth contributions, in which case qualifying distributions will be tax free.
TFCU Financial Advisors
6501 Tinker Diagonal
Midwest City, OK 73110