"Take a holiday from tax (until you're at least 59 1/2)"
Your benevolent Uncle Sam so fondly hopes you'll save more for your own retirement that he'll give you an extended holiday from income tax. Every penny you put into a tax-deferred savings plan--up to an annual limit--may earn, and earn, and earn, and not get taxed. At least not until you withdraw that money.
By far, the most popular income tax-deferred savings plans are those sponsored by employers. They go by several code names (Internal Revenue code names, that is), like 401(k), 403(b), or 457. After contributing as much as you can to those, check out two other tax-advantaged options. While you have to pay income taxes on your money before you can contribute to any of these options, any earnings within the plan continue to compound tax deferred until you withdraw them out of the plan.
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