One of the top ways to save taxes is through investments. Investing in tax-saving programs can help you grow your money while paying zero taxes. Here are some investment vehicles that have virtually no risk:
U.S. Savings Bonds, Treasury Bonds, and Securities
The U.S. Treasury offers a variety of investment vehicles, including U.S. Treasury bonds, U.S. Savings Bonds, notes, bills, TIPS, Floating Rate Notes (RTNs). These are endorsed by the federal government. To learn more about each investment program, visit Treasury Direct, a U.S. Department of Treasury website.
Retirement Accounts (Traditional IRA, Roth IRA, 401(k))
Experts believe that you will need at least about 80% of your current income to continue with your current lifestyle after retirement. Saving for retirement is a good way to also save on taxes. The various retirement plans to consider include:
- Individual Retirement Arrangements (IRAs)
- Roth IRAs
- 401(k) Plans and 403(b) Plans
- SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)
- SEP Plans (Simplified Employee Pension)
- SARSEP Plans (Salary Reduction Simplified Employee Pension)
- Payroll Deduction IRAs
- Profit-Sharing Plans
- Defined Benefit Plans
- Money Purchase Plans
- Employee Stock Ownership Plans (ESOPs)
- Governmental Plans
- 457 Plans
- 409A Nonqualified Deferred Compensation Plans
IRAs and 401(k)s are the most commonly used retirement plans. Traditional IRAs and 401(k)s are pre-tax retirement plans, which means that they are funded with income that has not been taxed. However, taxes need to be paid when withdrawals are made. In a Roth IRA, contributions are made with taxed income, but withdrawals are not taxed.
Maxing out retirement accounts each year is one of the top tax-saving strategies used by taxpayers. When it comes to investing, it is better to start as early as possible.
For help with tax planning call one of our offices:
Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Livonia 734-462-6161,
Madison Heights 248.544.6160, Royal Oak 248.399.7331,
Saginaw 989.782.1985, or St. Clair Shores 313.371.6600