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Tax status of your retirement savings

The first step in this process is to analyze the type and tax status of your retirement savings. For this purpose, divide your accounts into three categories:

  • Taxed Later: Traditional IRAs, 403(b), and 401(k)s are types of savings accounts that give you a tax deduction at the time you contribute. Those savings will be taxed later in retirement when you withdraw them – and the amount you pay taxes on includes both your contributions and the growth they accumulated over the years.
  • Taxed Now: Taxable savings are held in brokerage accounts, mutual funds, banks, etc. In other words, these are savings that you put in investment or savings accounts that you already paid taxes on but received no deductions. Taxes will be due on these savings if you realize capital gains through a sale or receive interest or dividends.
  • Taxed never: You will never pay taxes on qualified withdrawals from your Roth IRAs. Taxes will never be due on those funds because you already paid them when you converted a traditional IRA to a Roth or contributed to the Roth. One thing to keep in mind: You can withdraw your contributions to your Roth IRA at any time without paying taxes on them, but in order to withdraw the gains on your investments tax-free and penalty-free, you must be at least 59½ and have owned a Roth IRA for at least five years, with a few exceptions, such as first-time home purchase and paying for college expenses.

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Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421.0101
Fax: (888) 876.5101

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (763) 425-8778 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com

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If you would like to learn more about our tax services designed for clergy or payroll, bookkeeping or HR designed for churches, please complete the request form to have an advisor contact you.

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