IRA, tax-deferred saving accounts and after tax savings accounts

[mvaldes]

What is the name of your state? CA
What are IRAs, tax-deferred savings account and after tax savings accounts?

[FlyingRon]

IRA = individual retirement arrangement (commonly also called an individual retirement account) a particular form of tax defered savings.

A tax-deferred savings just means you put off paying the tax on the interest until sometimes in the future. Sometimes, you're also sheltered from paying tax on income that you use to deposit into the account.

There are many forms of tax deferred savings accounts most are for retirement purposes although some exist for things like funding educational expenses.

To my knowledge there is no "general" tax deferred savings. There are accounts that act like bank accounts that in fact invest the money into municipal bonds that end up earning interest tax free.

[efflandt]

A traditional IRA is tax deferred, although, deductability of contributions may depend upon whether you are "eligible" for an employee plan (whether you participate or not) and income. Any gains and tax deductable contributions are taxed when withdrawn (and 10% penalty if under age 59.5 with a few exceptions). Non-deductable contributions (not taxed again) are prorated as a portion of each distribution throughout the distribution period

Contributions to a Roth IRA are after tax and gains are not taxed at all once they become "qualified" (age 59.5 and you first started a Roth at least 5 years ago).

There are money market funds that pay somewhat lower interest, but are federal tax free. And some are also state tax free in certain states.

There are insurance company products that are tax deferred, although, they typically involve commissions or higher fees, so they do not make sense unless you have money left over after maxing out any other IRA's or employee retirement plans.