Presentation by Mirella Arias-Rios, Financial Advisor

First Option: 401k or IRA

First Tax Leverage: Tax Deduction

Whatever your contribution is, if it's a traditional 401k traditional IRA, you get to deduct it from your taxes the year that you contributed.

With the IRA you have until April of next year to contribute and you can still get the deduction.

Sometimes, if your employer matches it, you also get a match, and that's the free money.

However, some people miss out on free money because they don't know how it works and they don't contribute enough.

Unfortunately with this, 

• You can't take money out until you're 59 and a half years old
• Your money is tied in there for the long term, it's not liquid
• You can take it out but there will be penalties and you have to pay taxes

This means you can't start doing any distributions until you're 59 and a half years old.

Second Tax Leverage: Compounds Tax-Deferred 

You don't have to pay any taxes on the gain until you take out the contribution. You only have to pay the taxes afterward.

Second Option: A Tax-Free Retirement Account 

It works similar to 401K and IRA.

First Tax Leverage: Compounds Tax-Deferred

Similar with 401K and IRA, you still don't have to pay the taxes until after you start taking distributions.

Now the question is: Do you want to pay tax on the seed or on the harvest?

Best Option: Get a Retirement Plan as soon as you can

From Dennis Harabin, Founder of Relax Tax

"From the accounting perspective, people don't realize that they're building a tax time bomb. You buried all this money, a million dollars for retirement but in the end, you only end up with six or seven hundred thousand put out over time.

I always tell my clients not to ever worry about the death benefit. That's just a bonus, that's gonna happen, and somebody's gonna get a lot of money. But there's a lot of advantages for you while you're alive to have these tools and to work with them.

The tax deferral and the tax benefits you draw from it, all these pieces are there. The key is, get it as soon as you can and that's what I stress more than anything. It only gets more expensive every day and most people start looking at this at 59 and a half years old. So the sooner you get it the better.

I can't even begin to tell you how many people I've worked with who end up giving away 40+ percent of their distributions. They put the money in, and they hadn't had much time to bake. Now, they're turning around and giving back 45% of it because of tax penalties for withdrawing early."