This Savings Strategy Could Drastically Cut Your Tax Bill in Retirement

When you're saving for retirement, it's easy to focus solely on your retirement account balance. But it's important to remember that the money isn't always all yours to keep.

It depends on which type of retirement account you use. If you want to keep your tax bill as low as possible in retirement, there's one category of accounts you should prioritize.

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Roth retirement accounts are unique in how the government taxes them. Unlike traditional accounts, Roth accounts don't give you an upfront tax break on your contributions. This means you'll have to pay taxes on these funds in the year you make them without tapping any of those contributions to help you cover the bill.

In exchange for this, your money grows tax- and penalty-free afterward. As long as you're at least 59 1/2 and have had a Roth account for at least five years, you can withdraw money from these accounts in retirement, and the government will ignore them when calculating your tax bill for the year.

Having at least some Roth savings gives you a lot of flexibility in retirement. If you're nearing the top of your tax bracket, you can rely more upon your Roth savings for the rest of the year to keep yourself from jumping up a tax bracket.

You're allowed to contribute up to $7,500 to a Roth IRA if you're under 50 this year and $8,600 if you're 50 or older. Contribution limits for Roth 401(k)s are $24,500 if you're under 50, $32,500 if you're 50 to 59 or 64 or older, and $35,750 if you'll be between the ages of 60 and 63 by the end of the year.

Just make sure you understand the rules for your Roth IRA or 401(k) before you put any money there. And always make sure you review any changes, like increased contribution limits, before putting savings here in future years.

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