About the Talk
June 17, 2002 12:00 PM
260F Lor Chuan, Singapore260F Lor Chuan, Singapore
With the New Year with us, it is appropriate to consider your retirement savings and find out if you are benefitting at all from any applicable tax law with regard to your retirement future.
Melissa Sotudeh, a certified financial planner in Washington, D.C., offers tax-savvy advice on retirement savings.
What is the most vital aspect in retirement accounts tax-planning?
To a certain degree, you can control your income tax bracket by maximizing salary deferrals — for instance, by maxing your retirement accounts, such as 401(k) and IRA plans; hence, reducing your taxable salary. On the other hand, you can become tax-efficient when you invest money for college education, retirement or other objectives.
If you are in a lower tax bracket, take advantage of specific deductions, such as those for seeking a job or relocating for work, and tax credits, such as the education credit or the child-tax credit. Contribute to a Roth 401(k) as well, allowing you to pay lower-rate taxes today and then take out your Roth funds free of tax when you retire.
When you reach a higher tax bracket, salary deferral could be the best choice for a lower taxable income. Maximize your contributions to 401(k) or Health Savings Accounts.
Approach your investment planning as tax-efficiently as you can. This has nothing to do with tax brackets, rather, with the tax treatment of your portfolio investments. Strategies involve keeping the right investments in the right account (e.g., keeping tax-advantaged investments such as municipal bonds in a taxable account), annual tax loss harvesting and selecting funds with tax-effective features, such as low turnover ratios.