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Tax Deferred Retirement Income
Tax-deferred retirement income refers to income received from a retirement account or annuity that is not taxed until it is withdrawn. In other words, the investment earnings in the account grow tax-free until they are taken out as distributions. This can result in a lower overall tax bill, as the investment earnings have more time to compound without being reduced by taxes.
Examples of tax-deferred retirement accounts include traditional IRAs, 401(k) plans, and fixed annuities. In contrast, other retirement accounts, such as Roth IRAs and Roth 401(k) plans, are funded with after-tax dollars, so the investment earnings and distributions are tax-free.
It is important to consider your individual tax situation when choosing between tax-deferred and tax-free retirement accounts, as well as your financial goals and risk tolerance. A financial advisor can help you determine the best course of action for your specific circumstances.
Discover My New Retirement
If most people who retire with an IRA or 401k are not financially free…why do they continue on that path? There is an asset class that will grow your money risk-free and tax-free. Learn here now!
How Much to Take from Tax-Free, Taxable, and Tax-Deferred Accounts in Retirement?
You need to consider your tax bracket when you come up with a plan for drawing on your savings for retirement.
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