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Types & Treatment of Tax Preferenced Accounts
Contributions
Distributions
Growth in the acccount
The government wants you to plan ahead and incentives it, are you taking full advantage?
Pre-tax or Tax Deductible
Tax-Deferred
Tax-Free
Health Savings Accounts (HSAs)
Traditional Retirement Accounts
Roth Retirement Accounts
529 Plans (College or ABLE)
Non-Qualified Annuities
How much do I need?
Expect to replace
70 - 85%
of your income in retirement
Types of Retirement Accounts
Pre-tax or tax-deductible contributions & tax-deferred growth.
After tax contribution
Tax-free growth & withdrawals
Employer-Sponsored
SIMPLE IRA
SEP IRA
401(k)
403(B)
457
Roth 401(k)
Roth 403(B)
Roth 457
Individual
Traditional IRA
Roth IRA
Roth vs. Traditional IRA
Contribute up to $6,500 ($7,500 for 50 and older)
in 2023 combined annual contributions to Roth and traditional IRAs.
Roth IRA
Why choose a Roth IRA?
-
If you expect to be in a lower tax bracket now and a higher tax bracket in retirement.
-
If you need the flexibility to withdraw your contributions at any time without owing taxes or penalties.
-
At 59 ½ you can withdraw your contributions and gains completely tax free, if 5 years into it
Why you might avoid a Roth IRA?
-
Roth IRA contribution limits are reduced or eliminated at higher incomes.
Traditional IRA
Why choose a Traditional IRA?
-
If you expect to be in a higher tax bracket now and a lower tax bracket in retirement.
-
If you need the tax-break today.
Why you might avoid a Traditional IRA?
-
The amount you can deduct for contributions may be reduced or eliminated if you or your spouse is covered by a retirement plan at work.
-
There are Required Minimum Distributions
-
There is a 10% tax penalty for early withdrawals for non-qualified reasons.
Employer-Sponsored Accounts
-
These are opened only by employers and their specifics vary
-
Try to contribute enough to get the max. match, at least, if offered.
-
You cannot contribute if you leave employer
-
“Rollover” with caution from your employer account into an IRA when you leave your employer.
-
Loans can have high penalties pre-59 ½ .
-
Penalties exceptions exist for education, home purchases, medical expenses, etc.
If your employer doesn't offer a retirement program
-
You might be eligible for Oregon Saves
Oregon Saves
"Oregon employers are required to facilitate OregonSaves if they don’t offer an employer-sponsored retirement plan."
Saver's Tax Credit
The Saver’s Credit is a great way for low- and moderate-income people to save for retirement while also earning valuable tax credits.
The saver's tax credit is a non-refundable tax credit available to eligible taxpayers who make contributions to....
Employer-Sponsored Retirement Accounts
Individual Retirement Accounts
ABLE Accounts
Claiming a saver's credit when contributing to a retirement plan can reduce an individual's income tax burden in two ways.
-
the saver's credit reduces the actual taxes owed, dollar for dollar.
-
you receive either a reduced tax bill today or tax free withdrawals in retirement via a qualified account.
Credit Amount
Single
Head of Household
Joint Filers
Saver's Credit Income Limits (2024)
Up to 50%
of contribution
$0 - $23,000
$0 - $34,500
$0 - $46,000
20%
of contribution
$23,001 - $25,000
$34,501 - $37,500
$46,001 - $50,000
10%
of contribution
$25,001 - $38,250
$37,501 - $57,375
$50,001 - $76,500
0%
of contribution
more than $38,250
more than $57,375
more than $76,500
*The credit is worth a maximum of $1,000 ($2,000 if you file jointly).
Besides falling into one of these income tiers, you'll also need to meet the following requirements to qualify for the credit:
-
You are age 18 or older
-
You're not a full-time student
-
No one claims you as a dependent on their return.
-
Rollover contributions do not qualify
The Power of Tax Credits Vs. Deductions
Deductions lowers your tax bill by reducing your taxable income, a credit directly reduces your tax bill. Saver’s credit is not a refundable credit.
