1 Smooth retirement savings move you’ll thank yourself for later

A 401(k) may be the most popular retirement account, but it’s not your only option. There are several other retirement accounts you can (and should) take advantage of throughout your career, each with its own benefits.

A Roth IRA, in particular, has a unique tax-deductible benefit: You contribute money after taxes and then take tax-free withdrawals in retirement, as long as you’re 59 1/2 years old and you made your first contribution at least five years ago. follow. This retirement savings move can easily save retirees thousands in capital gains taxes.

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Roth IRA savings in action

As things stand, capital gains are taxed at either 0%, 15% or 20%. Here’s how much retirees could save based on the value of their investment:

Chart by author.

If the capital gains above seem excessive in a Roth IRA, consider that investing $7,000 annually and averaging a 10% annual return could yield over $500,000 in capital gains over 25 years. Just imagine the savings for people who become Roth IRA millionaires.

Take advantage of a Roth IRA while you can

One disadvantage of the Roth IRA is the income limit for eligibility. The bottom line, however, is that Roth IRA investments can continue to grow and compound even after you’re no longer eligible to contribute. That’s why it’s vital to take advantage of it while you can — you won’t regret it in retirement.