Holicent
VIP Contributor
It's a simple concept: you can reduce your tax liability now, and then pay the taxes on that money after you retire. That way, you'll be able to save more money for retirement. It's called a Roth IRA, and it allows people to make after-tax contributions to their retirement savings accounts. You can contribute up to $5,500 ($6,500 if you're 50 or older) per year in 2018.
How it works:
If you're contributing to a traditional IRA or 401(k) plan at work, you can also contribute the same amount directly into your Roth account. If you are eligible for the full $6,500 per year per person (age 50 or older), then this is an even better option because it will allow you to save even more money for retirement.
You won't have to pay tax on any Roth IRA contributions when they are made or withdrawn in the future. The IRS allows this because all earnings within the account grow tax-free until they are withdrawn as income in retirement — at which point they become taxable again.
How it works:
If you're contributing to a traditional IRA or 401(k) plan at work, you can also contribute the same amount directly into your Roth account. If you are eligible for the full $6,500 per year per person (age 50 or older), then this is an even better option because it will allow you to save even more money for retirement.
You won't have to pay tax on any Roth IRA contributions when they are made or withdrawn in the future. The IRS allows this because all earnings within the account grow tax-free until they are withdrawn as income in retirement — at which point they become taxable again.