Retire without taxes

Only one savings plan gives you the chance to free yourself from taxes in retirement. Are you making the most of it?

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10. How will a Roth affect my Social Security?
Another compelling reason to fund a Roth IRA is that you may be able to hold on to more of your Social Security check in retirement. As much as 85% of Social Security benefits become taxable if your income exceeds certain thresholds. In determining those levels, the IRS includes half your Social Security benefit, any income from a retirement job, pension payments, investment earnings and withdrawals from regular 401(k)s and IRAs.

But withdrawals from Roths are excluded from this calculation. So by pulling money from a Roth account instead of other sources, you may be able to protect some or all of your Social Security check from the IRS, thus boosting your after-tax income in a given year.

NEXT: When do I have to withdraw from a Roth?
Last updated September 16 2008: 11:34 AM ET
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