3 tax-free ways to save for retirement in Georgia

Credit: Dreamstime

Credit: Dreamstime

Georgia residents can explore these three tax-free ways to save for their retirement. Consumer advocate Clark Howard, known locally for his WSB-TV/ WSB News 95.5 and AM 750 Radio commentaries and shows and Atlanta Journal-Constitution column, offers much advice in his Investment Guide.

Traditional 401(k)

This retirement savings plan allows employees to invest money through their companies and defer paying income taxes on the saved money and earnings until withdrawal at retirement.

Roth IRA

This modified Individual Retirement Account (IRA) allows people to set aside after-tax income up to $5,500 per year ($6,500 for those age 50 or older).

Earnings on the account are tax-free. Then tax-free withdrawals may be made after age 59 1/2.

To set up a Roth IRA, Howard recommends checking with credit unions, banks, full-commission stock brokers, financial planners, no-load mutual funds (a fund sold without commission) or discount stock brokers.

Simplified Employee Pension (SEP)

For free, entrepreneurs can establish their SEPs with simple paperwork "wherever you want" such as at a low-cost investment house, Howard said. SEPs work like a traditional IRA or a 401(k) with a current-year tax deduction; but withdrawals are taxed at retirement, he explained.

They also offer flexibility so that you can put in nothing in a year or as much as $53,000 - helpful during those up-and-down years when you are beginning a business, Howard noted.