Take advantage of tax-advantaged accounts
Since the highest income tax bracket is 37%, prudent investors should take advantage of tax savings by using the right accounts.
“If you think your income will be higher in retirement than it is right now, you should contribute to a Roth IRA/401(k), which allows you to pay taxes up front and withdraw tax-free later,” Fellowes said.
He continued: “If you think your income will be lower in retirement, you should contribute to a traditional IRA/401(k), in which you don’t pay taxes on contributions, but instead pay them on withdrawals in retirement.”
