This strategy allows you to reduce taxes when working and then move money from a traditional IRA or 401(k) into a Roth IRA over time while paying little to no taxes. It is an advanced technique gaining popularity among early retirees and savvy investors.
Americans can take advantage of tax-advantaged retirement accounts for their tax planning. By and large, most of these accounts have specific tax incentives.
1. You deposit post-tax money into a Roth IRA account. Contributions are not tax-deductible.2. A Roth IRA is a retirement account that provides tax-free growth because the money you contribute is taxed before you deposit it.
Taxes are one of the biggest unknowns depending on the tax brackets during retirement and where you live in retirement. Some states are more favorable for retirement compared to others.