Wow. It's interesting learning the difference between the UK and US systems. We get Social Security sometime between 65-67, taxable. Private pensions are taxable, as is withdrawals from 401k and 403b savings plans. But we also have IRA accounts, not taxable until you withdraw funds (and you are mandated to start withdrawing those funds at age 72). Except for the Roth IRA. With the Roth, you pay tax when you deposit into the funds. THEN when you start withdrawing from the Roth, you don't pay taxes. Note: there's a yearly limit on how much you can put into a Roth.
The rationale for the regular IRA requirement is that you are in a lower tax bracket at that age, so the tax liability isn't as high.
One thing is true of both systems - they are a nightmare to navigate!
I thought the UK system was bad, but yours sounds worse. But I can see some similarities.
We have ISA (individual saving accounts), which you pay in from income already taxed, and you don't pay tax when you take the money out (or on any interest you have earned). There is a maximum investment each year in the ISA. I think ISA may equal Roth IRA.
The 401k, 403b, and IRA sound like our standard pension schemes in the UK. You get tax relief on contributions but pay tax when you take the money.
And we have the State Pension in the UK, which equals the US Social Security. I can start to take the start pension at 67. I can delay this and get an increased pension. However, this assumes I have paid my 35 years into the scheme. If I haven't, I get a 35th of the pension for each year I have paid.
Thanks for the info on the UK system; most interesting.
Wow. It's interesting learning the difference between the UK and US systems. We get Social Security sometime between 65-67, taxable. Private pensions are taxable, as is withdrawals from 401k and 403b savings plans. But we also have IRA accounts, not taxable until you withdraw funds (and you are mandated to start withdrawing those funds at age 72). Except for the Roth IRA. With the Roth, you pay tax when you deposit into the funds. THEN when you start withdrawing from the Roth, you don't pay taxes. Note: there's a yearly limit on how much you can put into a Roth.
The rationale for the regular IRA requirement is that you are in a lower tax bracket at that age, so the tax liability isn't as high.
Thanks for the comment.
One thing is true of both systems - they are a nightmare to navigate!
I thought the UK system was bad, but yours sounds worse. But I can see some similarities.
We have ISA (individual saving accounts), which you pay in from income already taxed, and you don't pay tax when you take the money out (or on any interest you have earned). There is a maximum investment each year in the ISA. I think ISA may equal Roth IRA.
The 401k, 403b, and IRA sound like our standard pension schemes in the UK. You get tax relief on contributions but pay tax when you take the money.
And we have the State Pension in the UK, which equals the US Social Security. I can start to take the start pension at 67. I can delay this and get an increased pension. However, this assumes I have paid my 35 years into the scheme. If I haven't, I get a 35th of the pension for each year I have paid.
Thanks for the info on the UK system; most interesting.