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Tax-Savvy Investment Strategies for Retirement Accounts

While most people receive Social Security, a secure financial retirement depends on also having significant savings in a retirement account. Many of us now live beyond this life expectancy, so the amount of funds accumulated in retirement accounts depends not only on what you contribute during your work life (and how well those investments did), but on your investment returns after you retire. A Coordinated Approach If you have more than one retirement account, such as a 401(k) at work and a personal IRA, it’s essential to coordinate your investment strategies across all your holdings. If you put them in your tax-deferred retirement account, the interest on the bonds effectively becomes taxable because all of your distributions are taxed as ordinary income, regardless of the source of the earnings. Factors in Making Investment Choices There’s no single strategy that’s right for all individuals. As inflation pushes interest rates higher, the value of an investment in a bond fund declines. Certificates of deposit (CDs) don’t have fees, but there are fees for investments in mutual funds, annuities and various other types of investments. Compare the fees and consider them to be one factor in your investment strategy. There’s no bar to investing in real estate, but there are various restrictions that make direct investments in realty impractical for most people. To make good choices for your personal situation, take advantage of investment advice that may be offered by your employer or the mutual fund hosting your account.