Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
IRA, 401(k), 529: What's the best tax-sheltered account type? Despite an occasional congressional nod to simplifying tax-sheltered savings, investors still have to find their way through a dizzying maze of tax-advantaged investment wrappers, according to this article from Morningstar. There are multiple types of IRAs, company-retirement plans and college-savings accounts, as a few examples, all with advantages and disadvantages. Each has its own tax treatment, its own rules over who can contribute and how much and its own policies on distributions. For instance, traditional 401(k), 403(b) and 457 plans are funded with pretax dollars, and withdrawals from these accounts will be subject to income tax. Roth 401(k), 403(b) and 457 plans accept after-tax contributions and offer tax-free qualified withdrawals. Pay close attention to the wrappers clients choose for their investment accounts and maximize their investments in tax-sheltered vehicles to enhance take-home returns. The longer the investment horizon, the greater the tax savings are apt to be. Learn more here about tax-sheltered investment accounts, as well as the tax implications of contributing to these accounts. -- Morningstar
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