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Withdrawing Before Age 59.5

What Happens If I Withdraw Money from My Tax-Deferred Investments Before Age 59½? Withdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10% federal income tax penalty; all distributions are subject to ordinary income tax. However, there are certain situations in which you are allowed to make early withdrawals from a

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Tax Deferrals

What Is Tax Deferral? “Tax deferral” is a method of postponing the payment of income tax on currently earned investment income until the investor withdraws funds from the account. Tax deferral is encouraged by the government to stimulate long-term saving and investment, especially for retirement. Only investment vehicles designated as “tax deferred,” such as IRAs,

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Tax-Free Investments

Is There Such a Thing as a Tax-Free Investment? The simple answer to this question is “yes.” There are two main types: (1) municipal bonds and municipal bond mutual funds and (2) tax-free money market funds. Municipal bonds are issued by state and local governments in order to finance capital expenditures; typically, municipal bond funds

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Mutual Fund Profits

How Can I Keep More of My Mutual Fund Profits? Provisions in the tax code allow you to pay lower capital gains taxes on the sale of assets held more than one year. The long-term capital gains tax rate is 15% for taxpayers in the 25%, 28%, 33%, and 35% tax brackets but increases to

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