Retirement savings and tax diversification

In retirement it’s especially important to understand how taxes affect your retirement accounts.
Let’s take a closer look, first tax deferred includes traditional 401(k) and IRA accounts. Contributions that you make to these are excluded from your current income, so you don’t pay tax on this money until you make a withdrawal. However, at age 70½, annual withdrawals are required, and taxes are due each time. Roth accounts are after tax accounts. Contributions are made to these with after-tax dollars. When you withdraw money later in retirement, no tax is due. This means that you can take money out at a time when you need it without tax consequences, or choose to leave it for later in retirement.
And then there’s taxable accounts that include all regular savings and investment accounts that have no tax advantages for contributing, and require you to pay capital gains tax each year. The importance of these accounts, however, is that they don’t attract penalties for withdrawals before a certain age. So, these give you a lot of flexibility for spending or emergencies.
If you have any questions call 320-679-5183 or go to the website yoursafemoneyshow.com.