What Are the Tax Implications of Retirement Savings?
Retirement savings accounts have different tax implications:
- Traditional 401(k) and IRA Contributions: These are made pre-tax, which lowers taxable income now but taxes withdrawals in retirement. - Roth 401(k) and IRA Contributions: Made with after-tax dollars, these accounts allow for tax-free withdrawals in retirement. - Catch-Up Contributions: For those aged 50 and above, additional catch-up contributions are allowed, providing tax advantages and boosting retirement savings.
