Retirement Planning and Considerations

June 12, 2025 | by Atherton & Associates, LLP

Retirement Savings Tools 

June 12, 2025
From the Office of Colton Cummings, Tax Associate

When thinking about retirement, it’s never too early (or too late) to start utilizing the many tools out there to build wealth while maximizing tax savings. While having money in a savings account may generate some interest year over year, there are much more beneficial retirement savings tools available that some may not be aware of.

Health Savings Account (HSA)

• A Health Savings Account (HSA) is a tax-advantaged savings account that allows individuals to set aside money for qualified medical expenses.
• This tool can be used not only to generate earnings on contributions made over time, but also to cover qualified medical expenses such as doctor visits, medications, hospital stays, and medical equipment to name a few.
• Contributions reduce your taxable income, and if distributions are used to cover medical expenses, then these distributions are tax-exempt as well.
• While there are no income limits, there are contribution limits, and to qualify, you must be covered under a high-deductible health plan (HDHP).

Individual Retirement Accounts – Roth IRAs

• After Tax Contributions: You contribute after-tax money that you’ve already paid taxes on.
• Tax-Free Growth: Your investments inside the Roth IRA grow tax-free.
• Tax-Free Withdrawals: Qualified withdrawals in retirement are tax-free and penalty-free once you reach age 59 ½ and the account has been open for at least five years.
• Withdraw Contributions Anytime: You can withdraw your contributions at any time, tax-free and without penalty.
• No Required Minimum Distributions (RMDs): Unlike Traditional IRAs, there are no required minimum distributions from a Roth IRA.
• Roth IRAs are most effective if you believe that you will have higher income and be placed in a higher tax bracket closer to retirement.

Individual Retirement Accounts – Traditional IRAs

• Tax Deductible Contributions: Contributions to a Traditional IRA are deductible from your taxable income, potentially reducing your current tax liability.
• Taxable Withdrawals: A Traditional IRA will grow on a tax-deferred basis and when you withdraw money in retirement, it is taxed as ordinary income.
• No Income Limits for Opening: Unlike a Roth IRA, there are generally no income limits to opening and contributing to a Traditional IRA.
• Required Minimum Distributions (RMDs): Generally, you are required to start taking withdrawals from a Traditional IRA at age 73.
• The Traditional IRA is most effective if you think you will be in a lower tax bracket heading into retirement compared to your current tax bracket.

Action Item
Health Savings Accounts and Individual Retirement Accounts (IRAs) can be beneficial retirement savings tools. Consult your tax advisor to discuss how these accounts could benefit you.