Tax-Advantaged Retirement Accounts are accounts that IRS rules allow for a certain advantages when an individual sets up and makes contributions to a retirement account.
Common types include:
- 401(k) Plans
- Traditional IRA
- Rollover IRA
- Roth IRA
- Other types of retirement accounts
Traditional IRAs and 401(k)s operate in a similar manner. The investor places pretax dollars into an investment account to grow tax free. The initial investment and subsequent gains are only taxed as ordinary income when the funds are distributed during retirement. A Roth IRA operates slightly different. The investor places after tax dollars into an investment account that grows tax free. All distributions during retirement are not taxed.