IF YOU WORK AT a midsized or large employer, you might be offered a 401(k), 403(b) or 457 plan. In general, private sector companies offer 401(k) plans, nonprofit and educational institutions offer 403(b) plans, and government organizations offer 457 plans. All operate under roughly similar rules.
The contribution limit for these plans is typically $23,000 in 2024 and $23,500 in 2025. Those age 50 and up can make an additional catch-up contribution of $7,500 in both 2024 and 2025,

RETIREMENT ACCOUNTS come in a bewildering array of flavors. Employer-sponsored plans include 401(k), 403(b), 457 and profit-sharing plans, as well as the SIMPLE IRA and SEP IRA. On top of that, there are individual plans such as traditional and Roth IRAs, and also tax-deferred fixed and variable annuities.
How can you make sense of that mess? All of these accounts offer tax-deferred growth. That means you don’t have to pay taxes on any investment earnings until you draw down these accounts,

AS A REGULAR EMPLOYEE, you likely have little or no control over how much you have in taxable earnings each year. But there’s plenty you can do to manage the tax bill generated by your investments. The rest of this chapter is devoted to the three strategies you ought to focus on.
First, make the most of the tax-sheltered retirement accounts available to you. That will mean not only stashing as much money as possible in these accounts,

IF YOU’RE LIKE MOST employees, you don’t have any control over when you receive your wages. Instead, as you seek to limit your annual tax bill, the key financial levers at your disposal include increasing your tax-deductible retirement account contributions, carefully managing your taxable investment accounts, and making sure you take full advantage of the available tax deductions and credits.
What if you’re a senior executive or a business owner who can influence the company’s payroll policy?

THE ALTERNATIVE minimum tax, or AMT, is a parallel tax system that forces you to calculate how much you owe in federal income taxes using a completely different set of rules. If the amount owed under the AMT is greater than under the usual income tax calculation, you have to pay the difference.
For individuals, the AMT consists of just two tax rates, 26% and 28%. When calculating how much you owe under the AMT,

THE STANDARD MEDICARE payroll tax is 2.9%, half of which may be paid by your employer, leaving your share at 1.45%. Add that to the 6.2% Social Security tax and you get the total 7.65% payroll tax. If you have a high income, you will notice that the Social Security tax stops getting collected once you hit that year’s threshold, which is set at $176,100 for 2025. But there’s no cap on the Medicare tax,

THANKS TO THE 2017 tax law, the standard deduction is roughly double the old level. In 2024, it’s $29,200 if your tax-filing status is married filing jointly, $21,900 for heads of household and $14,600 for single individuals. For 2025’s tax year, due to the OBBBA, those figures rise to $31,500 for couples, $23,625 for heads of household and $15,750 for single individuals. The standard deduction is slightly higher if you are elderly or blind.

IMAGINE YOU’RE SINGLE, you claim the standard deduction and you have income of $65,000 in 2025. You’d be in the 22% federal income tax bracket, but that isn’t how much of your income you’d lose to taxes.
On the first $15,000 of income, you wouldn’t owe any federal income taxes, thanks to your standard deduction. The next $11,925 would be taxed at 10% and the subsequent $36,550 would be taxed at 12%. That gets you up to $63,475 in total income.

UNLESS YOU ARE self-employed, it’s easy to forget about the Social Security and Medicare payroll tax. Your employer takes the payroll tax from your paycheck before it does almost anything else, including deduct those 401(k) contributions.
Those 401(k) contributions may reduce your income for purposes of calculating income taxes, but they don’t shrink the income that’s subject to the payroll tax. Moreover, unless you have self-employment income, you won’t even be reminded that you’re paying the payroll tax when you fill out your federal tax return.

YOUR INCOME COULD be subject to as many as five different federal tax systems. First, if you have a job, and hence you have what’s called earned income, you pay Social Security and Medicare payroll taxes. For many folks, this is the biggest tax they pay.
Second, there’s the federal income tax, which is why we spend the early months of each year sweating over Form 1040. Why is the form so complicated? One reason: In addition to payroll and income taxes,

IN THIS GUIDE, YOU’LL see references to your “income” or your “taxable income.” But these are messy notions.
As a rule, you can think of your taxable income as your income after deducting your standard or itemized deduction and any other deductions you’re eligible for. But not everything depends on your taxable income. For instance, various taxes and tax breaks hinge on your “adjusted gross income,” “modified adjusted gross income” and “combined income.”
Consider some examples.

THE FEDERAL TAX code can be utterly baffling, which helps explain why more than half of individual tax returns are completed by a tax preparer and many of the rest use tax software. Still, while every nuance of the tax code won’t be explained here, it’s important to understand the basics so you can better manage your annual tax bill.
How is your federal tax bill calculated? You start by adding up your gross income.

HERE’S A QUICK LOOK at the world of taxes:

The tax code was revamped in 2017—the most extensive rewrite since 1986. Most of the 2017 tax cut went to corporations. The new law has been a mixed bag for individuals, who now enjoy lower tax rates but also lost valuable deductions. Most households have seen their tax bill decline, but a significant minority are paying more. Despite hopes that the tax code would be simplified,

MY WRITTEN ASSET allocation calls for 80% of my portfolio to be in stocks, with the balance in bonds. That might seem aggressive for someone in their 60s, but I’ve long been comfortable taking stock market risk and, indeed, I boosted my allocation above 90% amid 2022’s stock market swoon. I continued with a 90%-plus stock allocation after my 2024 cancer diagnosis. After all, while my time horizon became very short, that of my heirs remained considerably longer.

A HEDGE FUND MIGHT allow you to cash out just once a month or once every three months. By contrast, mutual funds provide daily liquidity, meaning you can get out at the end of any day that the market is open, while ETFs can be bought and sold throughout the trading day. For that reason, mutual funds and ETFs that pursue hedge-fund-like strategies are sometimes referred to as liquid alternatives or simply “liquid alts.” What sorts of funds are available?