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After Tax Savings for Retirement
from:Most of us are familiar with pre-tax retirement savings programs like 401k’s and IRAs. These accounts are perfect for saving for retirement because they give you a tax break today, since any amount that you contribute is done on a “before tax” basis, reducing your taxable income for the year. In addition, interest accumulated on these accounts are not subject to taxation until you withdraw the funds for income during your retirement.
After tax savings accounts for retirement work in the opposite way. Often called Roth IRAs, these after tax accounts are funded using money that you are paying income tax on in the years that you contribute the money. So, contributing to a Roth IRA, or after tax savings account does not help you reduce your taxable income during the years that you’re working and contributing to them the way that traditional IRAs and 401k accounts do.
Instead, after tax savings accounts provide you with significant tax breaks during your retirement. You see, because you paid income taxes on the money you contributed to your after tax savings account during the year you contributed it, the money is not taxable when you withdraw it during your retirement. Not only is the money you contributed not taxed when you withdraw it, but the interest it has accrued during the years it has been invested is not taxable either.
So, contributing to an after tax savings account today helps reduce the amount of taxes you’ll pay during your retirement. This is beneficial because most of us try to live on a smaller income during our retirement years, and reducing the taxes we pay during our retirement can be a big help.
For a small monthly after tax contribution each month during your working years, you can be accumulating a very large tax free account to use during your retirement years. In the end, you’ll pay taxes on just a fraction of the amount in your account. This is in contrast to traditional IRAs and 401ks, where you’re really just delaying the payment of taxes since you eventually will pay taxes on every bit of money in these accounts, even the interest that has accrued.
Most financial experts recommend that you plan for your retirement using a combination of before tax accounts like 401ks and traditional IRAs along with after tax savings accounts or Roth IRAs. Using this combination helps you to save for your retirement in a way that helps you avoid some taxes both today and during your retirement years. This combination is the best way to save money now and be ready for a financially comfortable retirement, too.
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Savings Bonds Tax News
Dickinson tax rates down slightly (The Iron Mountain Daily News)
IRON MOUNTAIN - Property tax rates are down throughout Dickinson County in 2008, with the biggest drop coming in Iron Mountain. Property owners in the Iron Mountain School District will catch a break because the school debt levy has fallen to 6.3 mills, down 1.2 mills from 2007. The school district reduced the levy by refinancing bonds. When all property taxes are included, the total tax rate f
Read more...Premium bond winners fall as interest cut hits popular saving product (Daily Telegraph)
Premium bonds one of the country's most popular savings products have been hit by the Bank of England slashing interest rates.
Read more...Savings bond tax bill varies (Bankrate.com via Yahoo! Finance)
Several factors will determine a man's tax bill after he cashes in Series EE savings bonds.
Read more...Bedford slashes spending to deliver small tax hike (The Journal News)
BEDFORD - Taxes would go up 2.2 percent under the town's $25 million budget proposal.
Read more...Fitch Rates Wisconsin's $150MM GOs 'AA-' (Business Wire via Yahoo! Finance)
NEW YORK----Fitch Ratings has assigned an 'AA-' rating to the State of Wisconsin's $150 million general obligation bonds, 2008 series D, for competitive bids as early as Dec. 1. The 2008 series D bonds are due May 1, 2012-2030, callable at par beginning May 1, 2018.
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