5) Retirement Planning

When you open a 401(k) or IRA, you have to choose a tax flavor.

• Traditional (Tax-Deferred): You put money in before taxes. This lowers your tax bill today. You pay taxes only when you take the money out in the future.
  • Best if: You earn a high salary now and expect to be in a lower tax bracket later.
• Roth (Tax-Free Growth): You put money in after you pay taxes. You get no tax break today, but the money and all the profit it makes is 100% tax-free when you take it out later.
  • Best if: You are young, earning a starting salary, and expect to be much wealthier in the future.