Roth IRA

• A Roth IRA is a tax-free retirement account. All contributions made to the Roth IRA are made on an after-tax basis. You may invest in any investment allowed inside of an IRA including stocks, bonds, mutual funds, real estate and precious metals. When you make withdrawals during retirement, you do not pay income tax on any of the distributions. Because of this, you can invest in a Roth IRA and not worry about what future tax rates will be since there is no future tax liability.
  
  

Cash Value Life Insurance

• Cash value life insurance is life insurance that builds an equity value. Cash value life insurance may be set up to build significant cash values over time. These cash values may be withdrawn or borrowed against to supplement other retirement income. When this is done, all withdrawals from the policy up to your basis (the total amount of money you've paid in as premiums) is tax-free. All policy loans from the policy are tax-free as long as the policy remains in force during your lifetime. Additionally, many insurance companies offer low cost or zero percent interest rates on life insurance policy loans.
  
  

Tax-Free Bonds

• Tax-free bonds are municipal bonds issued by state and local governments. These bonds are ideal investments for retirement if you are in a high tax bracket. The higher your tax bracket, the better the tax-free bond is for your portfolio. This is because tax-free bonds eliminate all taxes on the income you receive from the bond. An equivalent taxable yield often accompanies tax-free bond investment rates to give you an idea of how good the bond would be for you in your specific situation. For example, if you are in a 28 percent tax bracket, you would have to earn 8.33 percent on an ordinary (taxable) investment to equal a tax-free bond paying 6 percent. This means that you can take much less risk in your investments and receive a tax-free retirement income.
  
  

Annuities

• Annuities are able to generate a very low tax income during your retirement. Annuities that guarantee you a retirement income are called "immediate annuities." An immediate annuity in an insurance policy designed and sold by life insurance companies. When the insurer makes payments to you, the payment consists mostly of a return of principal (i.e., 95 percent or more of the payment is a return of principal) with a small amount of money added as interest. Since only the interest is taxable, most of your retirement income from an immediate annuity would not be taxed.