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Tax Strategies for Retirement

It is common knowledge that there is a time value to money. Money today is more valuable than money later. This is based on the premise that money can be invested today and over time it will grow into more money as a result of interest that the money will earn. When retirement plans are developed, they anticipate that early contributions to a retirement fund will appreciate as a result of interest or dividends earned from selected investments. A good way to think of this is like a snowball growing bigger as it rolls downhill.

When earnings are realized by an investment in a money market account or any type of account that is not tax deferred, those earnings could be taxable, which means that they could create an obligation for the recipient to have to pay income taxes on the earnings to the taxing authorities. Having to pay taxes out of your investment earnings can reduce the amounts that you have invested and can thereby slow down the rate at which your funds grow.

Because of this, a common strategy in saving for retirement is to try and keep your investments housed in “tax deferred” instruments. Government taxing authorities have approved certain investment products as “tax-free” investments. These are typically government and municipal bonds, treasury bills, treasury notes or government securities that are offered to the public by a federal, state, or city governmental body. Government taxing authorities have also approved certain “deferred tax” instruments that investors can utilize to defer tax obligations on their various investment earnings until they reach retirement age. Among them are IRAs, Roth IRAs, SEPs, SIMPLEs, 401(k)’s, 403(b)’s, 457(b)’s, Defined Benefit Plans, Defined Contribution Plans, Fixed Annuities, Variable Annuities, ESOPs, and countless others. With so many tax-free investment products and tax deferred instruments to choose from, is can be difficult to know which may be the best for you to make use of.

At Burkhart, Peterson & Company, we have tax Attorneys, Certified Public Accountants, Enrolled Agents, and Insurance Agents on staff. Our diverse group of insurance and tax professionals enables us to explain your options and to help you identify what may be best for you.

Whether you are an individual trying to navigate your own retirement or an employer trying to find the best plan to put in place at your company, we are better prepared than anyone to help you understand and identify the right instruments to use to suit your needs. Please contact our office if you need assistance finding and implementing the right tax-deferred instruments.