Besides 401k and Roth IRA and traditional IRA, what are my options for tax deferred investing?

I have my 401k maxed out and both the Roth IRA and traditional IRA have low contribution limits of about $4000 this year.

Are there any tax deferred ways of saving for retirement with much larger amounts (say $20,000 to $40,000 a year)?

Obviously I can just save in a normal investment account. My understanding is that only dividends (not growth) are taxed each year. A tax deferred account just defers tax on the dividends (correct me if I'm wrong). If that's the case (and if I have no alternatives) then I'll just try to choose a fund that doesn't give dividends.

3 Answers

  • 1 decade ago
    Favorite Answer

    If you can start your own small business, you could look into SEP, SIMPLE, and Keogh accounts. They provide similar tax deferral with higher contribution limits.

    You could decide on investing in rental properties. They provide many tax advantages as well. Tax on capital gains for selling real estate can be deferred if you use the proceeds to invest in another property.

    More options include investing in municipal bond funds, where the dividends can be tax free, or investing directly in tax exempt municipal bonds.

  • Anonymous
    4 years ago

    it particularly is an exceedingly close call between a typical IRA and a Roth IRA. right this is the version. the classic IRA enables deducting contributions out of your contemporary earned earnings, yet once you ultimately get rid of the money from the classic IRA you need to pay finished taxes on each and every of the money. The Roth IRA on the different hand would not enable deduction of contributions from earned earnings yet there is in no way any tax on the quantity earned interior the Roth IRA. So the version is almost 1 between you pay me now or you pay me later. A 401k is much like the classic IRA different than that your are constrained among the techniques of investment which you have. by using fact of that shrink it is not so versatile. It does have the excellent thing approximately your being waiting to possibly make investments greater for retirement interior a 401k. because earning from a typical IRA are taxed on the full tax cost, it particularly is a bonus to take a place in products that is taxed on the full tax cost besides--CDs, bonds, REITS, constrained Partnerships, or short term investments. because earnings of a Roth IRA are no longer taxed in any respect, the comparable carry authentic on the popular investment types. That way there is not any tax. Tax advantaged investments consisting of those that are concern to the decrease cost of long term capital features, are superb invested in exterior of an IRA. yet whilst they are invested in interior an IRA, it could be a Roth IRA particularly than a typical. understand that this assume you're allocating your investments among a distinctive set of investment automobiles. there's a trick you may additionally use. whilst making an investment in a typical IRA, you could roll over a element to a Roth IRA at any time and pay the tax due on the roll over. If one ought to locate oneself interior an exceedingly low tax bracket quicker or later in ones existence, it particularly is a bonus to do a roll of an quantity right into a Roth IRA that may no longer greater advantageous than what could bump one right into a greater suitable tax bracket. Assuming one would be amassing earnings for 20 to 30 to 40 years on the quantity invested, apparently to me that the convenience lies with the Roth IRA. there is the the flexibility to evade taxes on very numerous funds and who's properly-known with what the tax cost would be 30 years from now?

  • 1 decade ago

    Certian types of annuities and variable life contracts are tax deferred as well.

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