Your employer’s plan is not the only way you can save and receive tax benefits. Several other account types offer tax advantages to help you work towards important savings objectives:
Like your employer’s retirement plan, IRAs allow you to invest money for retirement while providing tax benefits, as well. You can invest up to $6,000 in 2022 — or up to $7,000 if you’re 50 or older.
There are two kinds of IRAs to consider — Traditional and Roth.
Contact your financial professional or visit capitalgroup.com for more information about IRAs.
While your savings do not grow tax-deferred in a brokerage account as they would in a Traditional IRA or 401(k) plan, you can still take advantage of another tax-friendly saving opportunity by investing in mutual funds outside of your retirement plan. Current tax rates on qualified dividends and long-term capital gains can be considered favorable when compared with regular income tax rates.
You can save even more in a brokerage account by investing in tax-exempt bond funds. These mutual funds typically invest in bonds issued by state and local governments to finance projects such as highways, schools, hospitals and airports.
For more information on investing in mutual funds, click here. For information on American Funds tax-exempt bond funds, click here. Your financial professional can help you select from these or other tax-exempt funds that may be right for you.
A variable annuity is an investment that includes an option that can help make sure you don’t outlive your assets.
For information on the American Funds Insurance Series® suite of variable annuities, click here. Your financial professional can help you select from these or other variable annuity products that may be right for you.
If you’d like to put money away for college tuition or other education expenses and receive certain tax benefits, consider these three options:
Note: States take different approaches to the income tax treatment of withdrawals. For example, withdrawals for K–12 expenses may not be exempt from state tax in certain states.
If you accelerate gifts to a 529 account beneficiary, no additional gifts can be made to that beneficiary over the next four years after the year in which the one-time gift is made. If the donor of an accelerated gift dies within the five-year period, a portion of the transferred amount will be included in the donor’s estate for tax purposes. Consult with a tax advisor regarding your specific situation.
For more information on how to invest in CollegeAmerica®, a 529 savings plan from Capital Group, click here or contact your financial professional to open an account.
If you or a loved one are disabled or blind, you may be able to save for disability expenses while receiving tax benefits through an ABLE account.
The beneficiary must be blind or disabled from a condition that began before age 26.
With an ABLE account:
If withdrawals are used for other purposes, the earnings are subject to a 10% federal tax penalty as well as federal and, if applicable, state income tax.
For more information on how to invest in ABLEAmerica, an ABLE plan from Capital Group, click here or contact your financial professional to open an account.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. Similar information is contained in the CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. Similar information is contained in the ABLEAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. ABLEAmerica is distributed by Capital Client Group, Inc., and sold through unaffiliated intermediaries. CollegeAmerica is distributed by Capital Client Group, Inc., and sold through unaffiliated intermediaries.
Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits not available through ABLEAmerica. Before investing in any state's 529 plan, investors should consult a tax advisor. ABLEAmerica is a nationwide plan sponsored by Virginia529. CollegeAmerica is a nationwide plan sponsored by Virginia529.
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As of July 1, 2024, American Funds Distributors, Inc. was renamed Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.