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Try to divide your retirement savings efforts into three different categories, said Kevin Meehan, CFP and Regional Chair of the Wealth Enhancement Group in Itasca, Illinois. Those are:
• Tax deferred: Accounts such as a 401 (k) or a traditional IRA, in which you make pre-tax contributions and are taxed on retirements.
• Duty free: Think about Roth 401 (k) s and Roth IRAs, where you invest after tax dollars which then increase and can be withdrawn tax free in retirement.
• Taxable: This sub-fund includes options such as brokerage accounts and savings, where you are taxed on interest, dividends and / or gains.
Having a mix can help you better control your tax situation in retirement, he said, because you have more flexibility in the amount of your withdrawals, from which. Diversified savings may also be essential if you plan to retire earlier, said Stanzak.
"We often talk about building this taxable basket, especially for people who want to retire earlier, because they may not have access to a retirement account without penalty," she said.
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