Retirement Taxes!

Retirement is often more complex than it needs to be. Ideally, it would be nice to have a single retirement account that you can withdraw from at a fixed tax rate—similar to capital gains. Unfortunately, the government has created a plethora of retirement options with varying degrees of benefits and taxes.Today, there are two primary retirement vehicles—pre-tax retirement accounts (such as a 401k and IRA) and post-tax retirement accounts (such as a Roth IRA).Pre-tax means that the contributions to your retirement account aren’t taxed when you put them in, and they count as a deduction on your taxes. Post-tax means that you contribute funds to your retirement account after they have been taxes. Each type of retirement account has benefits and disadvantages—your current and future tax brackets are the most significant factors in determining which option is suitable for you.Traditional 401k or IRAs tend to benefit individuals who are in high tax brackets now and will be in low tax brackets in the future. A Roth IRA or Roth 401k tends to help those who are in lower tax brackets now and expect to be in a higher tax bracket in the future.If you’re not sure which account you should open, we suggest talking to your CPA or financial advisor for some direction—they will help model your retirement and give you the best advice.No matter what you do—make sure you’ve created a retirement plan and that you start today!