【理财】節稅小幫手 206 - RETIREMENT ACCOUNT WORKS? | 佳財會計師事務所

While it is generally a good idea to contribute money into your qualified retirement account, there are a few things that need to be considered before a final decision is made.

The first step would be to know your income bracket; the U.S. implements a progressive taxation system, meaning that the taxes you owe aren’t measured at a fixed rate. If your current tax bracket is at 12% or 10%, multiply your contribution amount by the rate; what results is a rough estimate of your tax savings. If your current tax bracket is higher than it will be when you retire, it may not be worthwhile for you to contribute now.

Second, ask yourself how much income your retirement savings generate. Deferring your taxable income to a retirement account is one thing; not losing your retirement money is another. If you are not well versed in selecting optimal financial vehicles, there’s a good chance that they might not work for you.

Last, you must understand the concept of self-directed IRAs. Self-directed IRA brokerage houses do not offer you a menu to choose investment vehicles. The term self-directed IRAs implies that you will initiate and process the deal yourself. Although this sounds plenty of freedom, especially for professional investors, there are many pitfalls that will cause a taxable event. A well-versed CPA can help you avoid them.

Proactive tax planning is a key to win your tax battle. Remember, if you are not preparing to win, then you are preparing to lose. Stay active and you will find out that you are richer than you think you are!