3 Ways To Lose Money

A Roth has several key benefits, starting with tax free retirement income. That’s not the case with a traditional IRA, where contributions are “pre-tax.” You deduct them from adjusted gross income on your tax return, but you have to pay income tax on your withdrawals when you retire.

A Roth doesn’t work that way. Your contributions are with “after-tax” dollars. True, you don’t get the tax benefit now, but it’s worth it because your withdrawals during retirement are 100% tax free. The IRS figures it already got what’s coming to it.

A Roth is especially good if you project your tax rate will be higher in retirement than it is now. Generally that means the longer the time until you retire, the better a Roth works for you.

Also, unlike a traditional IRA or 401k, you won’t have required minimum distributions someday. Also, almost anyone can contribute to a Roth IRA and if you bequeath one to your heirs, they won’t have to pay taxes on withdrawals, either.

There are actually two versions of the FSA. One is for medical expenses and the other for dependent care, which covers child care, care for a elderly adult, in-home dependent care, before and after school care and nursery school.

Both types must be offered by your employer— you can’t set these up on your own. You also have to sign up for and contribute to each separately. Your HR department can talk you through the process. Bottom line, an FSA lets you pay for qualified expenses with pre-tax dollars, saving you a lot of cash.

There are plenty of tax withholding calculators online to help you fill out a new W-4 withholding form. The goal is to have the tax withheld from your paycheck come as close as possible to what you’ll have to pay in taxes.

There are three ways to avoid losing money. We hope you’ll take advantage of them. We also hope you’ll make God part of the process of becoming a better steward.