401(k)s and IRAs: Grow your money, shrink your taxes

How to invest for retirement so that you get rich - and the IRS doesn't.

First things first
Cash It Out
First things first
While planning for retirement takes plenty of preparation, tapping into your nest egg requires just as much care and strategy.

The rule of thumb for most investors to follow involves spending your taxable savings first, allowing your IRAs and 401(k)s to keep growing. But sometimes it's necessary to break this rule.

Say you have highly appreciated stocks and funds in taxable accounts that you don't need for income and want to leave to your heirs. You'll pay high taxes if you cash them in, while your heirs will get the benefit of a stepped-up cost basis (and thus a lower tax bill). If so, move on to tax-deferred accounts like a 401(k) or IRA.

Or if you expect your taxable income to fall in a given year, take advantage of your lower-than-usual tax rate. Bypass step one and withdraw funds from your 401(k) or IRA.
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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.