Thomas says the number one question clients ask relates to retirement. "People seem to be getting more serious about having enough to sustain themselves for the rest of their life," he says, adding that maximizing contributions to a retirement savings plan makes tax-reducing and wealth-accumulating sense. Traditional IRA and 401(k) contributions grow tax-free until withdrawn, with the added benefit of lowering your taxable income as you contribute.
A tax-deferred retirement account also lets you postpone capital gains taxes. The profit you make when you sell a stock results in a capital gains tax liability. Holding the stock for more than a year lowers the tax rate, but trading based on tax implications can become time-consuming and expensive.
When you trade through a traditional individual retirement account, Keough, 401(k) or SEP -- simplified employment pension -- plan, you can avoid taxes until you make withdrawals. Withdrawals made during retirement get taxed as ordinary income. This rate can be lower in retirement than the tax rate while you are working.
Funneling an investment in a high-growth mutual fund through your tax-deferred retirement account offers a similar tax advantage.