You'll probably be withdrawing money more frequently in your retirement years than you did in the past. So it's important to account for taxes when you begin withdrawals from the investments you have set aside for retirement.

Taxable Accounts
Tax-Deferred Accounts

Taxable Accounts
If you withdraw money from taxable accounts, any gain on those investments will be subject to taxes. The tax rate will depend on your tax bracket and the length of time you owned the shares.

You also may have a taxable gain if you exchange shares between mutual funds. An exchange involves selling shares of one fund and buying shares of another.

If you sell or exchange shares you owned for more than 12 months, any capital gains will be taxed at a maximum tax rate of 15%. If you sell or exchange shares that you owned for 12 months or less, any capital gains will be taxed at your ordinary income tax rate, which can be as high as 35%.*

Tax-Deferred Accounts**
Generally, when you withdraw money from a 401(k) or other employer-sponsored retirement plan, you will owe income tax on pre-tax contributions and on any earnings at your ordinary income tax rate.

When you withdraw money from a traditional IRA, you will owe income tax on any deductible contributions and on any earnings at your ordinary income tax rate.

When you withdraw money from a Roth IRA after you reach age 59½ and at least five years after you first opened a Roth IRA, you may withdraw earnings without owing federal income tax. You can withdraw contributions free of federal income tax at any time.



*These capital gain and ordinary income tax rates apply to sales and exchanges through Dec. 31, 2008.

**Withdrawals from a tax-deferred retirement account prior to age 59½ generally are subject to income taxes and a 10% penalty tax.

This information is for educational purposes only and is not intended as investment or tax advice.
 

To learn more about American Century Investments or other mutual fund companies, visit Fund Companies. For particular fund information, visit Fund Selector.