One word makes a retirement plan a Tax-Free Retirement Plan, and that word is Roth. For a tax-free plan, there are mainly 2 kinds, Roth IRA and Roth 401k. Both of these are established retirement plans and are not always Roth.
You already may be a little familiar with these retirement plans. For both, contributions can be made, and that is something that goes for more retirement plans. In addition, it is common to see employers set these up for their employees and even contribute a certain amount. This is usually decided when the employee is signing their employment contract.
Both originally, these plans are not tax-free; they are tax-deferred. Like we said before, with a tax-deferred plan, tax is paid when a withdrawal is made. But these can be turned into Roth accounts, and this ultimately makes them tax-free.
Both of these accounts can be set up by an insurance company, and the process is fairly simple. When you come in to talk to an insurance agent, they can go into detail about the major difference between both of them. But what is important is both of these can be turned into Tax-Free Retirement Plans.
Benefits and Advantages
I know that we are probably thinking the same thing. The benefits and advantages of having a tax-free account are that the account is tax-free. You are absolutely right. In fact, that is the main reason why people look into this kind of plan.
When it comes time to retire, many don’t have an extra income that they can rely on. With the majority of retirement plans, when a disbursement is made, the account owner has to pay income tax on it. This just reduces the amount of money that they have to use.
The great thing with a tax-free account is the total amount that you have in the account you can use as you please. There is no thinking about tax, and considering how much you’ll have after that is taken into consideration. This is why so clients like to choose this plan.
All the funds in the account are yours to utilize during your retirement. You can start making withdrawals from the age of 59 ½ or whenever you decided you’re ready to retire.
Having a tax-free account is the best advantage of this plan, and that is a reason why you should consider it. If you have any questions about a Tax-Free Retirement Plan, give a call to our amazing team, and they will be happy to answer those for you.