How are retirement savings taxed?
The money you save for retirement is usually taxed in one of three ways:
- Tax-deferred - instead of paying federal income taxes when contributions are made, you pay them when you start taking withdrawals. Assuming no withdrawals are made until you retire, you may be in a lower tax bracket when the taxes are eventually paid.
- After-tax - you pay taxes on the contributions when you make them and later withdraw them tax-free. With an after-tax contribution, you will still pay tax on the associated earnings at withdrawal
- Roth - you pay taxes on the contributions when you make them, and might be able to later withdraw both the contributions and the earnings on those contributions tax-free, if certain conditions are met
Neither Nationwide nor its representatives give legal or tax advice.
It’s always a good idea to consult with your tax professional for answers to your specific tax questions.