As you approach retirement age, taxes will likely become one of your bigger expenses. Traditional IRAs and 401k plans can be tax-deferred, which helps maximize savings. But, when you withdraw from these accounts, you’ll have to pay taxes on the amount.
Interest earned through savings accounts is taxed at your ordinary income rate, and the income that some bonds generate might be taxable as well. Moreover, any profits from selling an investment are taxed at the capital gains rate.
Before you start putting your money in taxable accounts, such as mutual funds and bonds, it’s recommended that you maximize your 401k and IRA options, reported Forbes.
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