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This unit has discussed the advantages of tax-deferred plans to invest for retirement. These include employer-provided plans, small business employer/employee plans, plans for the self-employed, Individual Retirement Accounts, and annuities. Tax advantages are that earnings are not taxed until funds are withdrawn, and contributions are often made with pre-tax dollars that are not subject to income tax. As contributions to some IRAs and annuities may not be with pre-tax dollars, putting the maximum in tax-deferred employer plans first will bring greater returns at retirement. Keep in mind that there are penalties for early withdrawal on many of the plans, so those dollars that are needed before age 59 1/2 are better invested in other accounts. Also, once you have determined which plan works for you, you still have to decide on what investments you will put in the plan. Other units in this course will help you make those decisions. Start now with the action steps. The sooner you start, the more time your money will have to grow! Work on the Action Steps now to get started. |