After-Tax Plan

After-Tax Plan-01Retirement is something that we will all face sooner or later, but the way we prepare for it may differ from person to person. You may be an employee at a job where you have the option to deposit into a 401(k), an IRA, or some other tax-advantaged savings plan.

These plans provide a number of various benefits and can help you develop a substantial savings when your retirement day arrives. Most of these plans allow for tax deferral on contributions and on earnings/growth and, for some, there is the added bonus of your employer matching your input. Because of these plans implemented by your employer, millions of workers, who otherwise might not be saving for their retirement, are responsibly saving regularly.

Unfortunately, the truth for many people approaching retirement is that a combination of these accounts, in addition to any social security benefits they may receive, may not be enough to provide a comfortable retirement. How will they build up enough money? What options do they have? While a purchased immediate fixed annuity is one option, there is another option that is more flexible and perhaps more attractive from an income tax perspective – after-tax savings and investment accounts.

While what you have heard is true, after-tax accounts do not offer upfront tax deductions/credits for tax-deferred growth; they do offer a number of advantages to the user. Some of these advantages make after-tax accounts attractive complements to standard retirement plans:

There are no contribution limits:
While standard retirement plans have a maximum annual contribution limit, after-tax plans have no limit and allow the user to deposit as much or as little as often or as rarely as they please.

There are no income limits:

Most tax-advantaged plans have income limits. Employer plans limit the degree of participation for workers with high incomes through anti-discrimination rules. IRAs and Roth IRAs impose income caps, which prohibit contributions for years in which the caps are exceeded, although non-deductable IRA contributions are not subject to an income limit. An after-tax account is available to anyone, regardless of his or her income.

Easy access to funds:

Unlike employer retirement funds, an after-tax account gives you the freedom to access your hard-earned money whenever you choose.

Investment flexibility:
Unlike participants who utilize an employer retirement plan, taxable accounts give you unlimited investment options, unlike employer plans or IRA or Roth IRAs, which limit the investment choices by the account administrator.

Couple these benefits with others including tax flexibility, no minimum distribution requirements, and estate planning flexibility, and an after-tax investment plan gives you the options to be in control of your money. A well financial plan can map out the correct mix of retirement plans, IRAs, and Roth IRA accounts, depending on the individual’s goals, access to various plans, income level, time to retire, and other factors. If you would like to begin planning your future to insure that you’re financial stability is in order when your retirement day comes, contact SMA Services today and let us help you become ready for the first day of your retirement.

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About Bob Cantlay

I have been working for the Southern Medical Association since 2004 and hold Bachelor of Science degrees in both Business Administration & Computer Science, as well as a Masters of Management. Outside of work, my wife and two kids are the center of activity; but occasionally I get away long enough to play Ultimate (Frisbee Football). I also have a newfound interest in kayaking.

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