10 Ways Uncle Sam Helps You Save Money

Saving for the future is of paramount importance to all Americans. Luckily, we all have a rich uncle to turn to for some help. His name is Uncle Sam.

Thanks to the tax code, you have several ways to save that are either tax-free or tax-deferred. Here's a look at 10 popular savings options.

Individual retirement accounts
Known popularly as IRAs, for 35 years these accounts have provided individuals a way to save for retirement and save on taxes. Anyone who works, either for himself or an employer, can set aside a portion of that income in a personal retirement account.

Over the years, the concept has been refined, with tax savings and earnings possibilities enhanced. Generally, individuals with wage income (rather than self-employment earnings) will choose to contribute to either a traditional IRA or a Roth IRA.

1. Traditional IRAs
"Traditional IRA" is the name given to the original account created in 1974. This account is available to anyone younger than 70½ who earns money. The contribution limit for 2008 is $5,000 and money can be put into these accounts for last tax year, up until the April 15 tax-filing deadline. The same contribution limit applies for the 2009 tax year.

• Advantages: The earnings are tax-deferred, meaning you won't owe the IRS until you make withdrawals, which you can start taking at age 59½. Workers age 50 or older (but younger than 70½) can put in another $1,000 a year. Some individuals also might be able to deduct these contributions.
• Drawbacks: You'll eventually owe taxes on at least some of the money in the account. You cannot contribute once you reach age 70½. When you reach that age, you must start taking out a minimum amount based on an IRS longevity calculations. This required distribution is waived for some older IRA owners in 2009.

2. Roth IRAs
Roth IRA contributions were first accepted in 1998. That year, $8.6 billion went into these retirement plans, with another $39 billion transferred from traditional IRAs to Roths. By 2001, IRS data showed contributions to Roths had surpassed the amount going into traditional accounts.

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