Traditional IRA

• Earnings are tax-deferred until withdrawn. A 10% IRS penalty may apply for withdrawing before age 59 ½.
• Contributions may be tax-deductible depending on your modified adjusted gross income and other factors.

Roth IRA

• Earnings are tax-deferred and tax-free upon withdrawal if certain requirements are met.
• Contributions are not tax-deductible.
• You must meet certain income requirements based on your tax status to contribute.

401(k), 403(b), SEP IRA, SIMPLE IRA

• Contributions are made with pre-tax dollars.
• Funds are generally tax-deferred until withdrawn. A 10% IRS penalty may apply for withdrawing before age 59 ½.

Fixed annuities

• Earnings are tax-deferred until withdrawn. Tax treatment depends on whether the contract is annuitized or if partial surrenders can be taken.
• A 10% IRS penalty may apply for withdrawing before age 59 ½.

Variable annuities

• Earnings are tax-deferred until withdrawn. Tax treatment depends on whether the contract is annuitized or if partial surrenders can be taken.
• Transfers of funds between investment options within the annuity are generally tax-free.
• A 10% IRS penalty may apply for withdrawing before age 59 ½.

Life insurance

• Insurance proceeds paid to the policy beneficiaries are generally income tax-free.
• Certain types of cash value life insurance provide an option to access cash value income tax-free through loans, partial surrenders or both.
• Surrenders from Insurance policies may be income-tax free or taxable depending on if the policy is a Modified Endowment Contract (MEC). For non-MEC policies a quote should be requested prior to taking a surrender if the policy has accumulated earnings.

529 plans

• Earnings are federal income tax-free when used for qualified higher education expenses, otherwise earnings may be subject to tax and a 10% penalty may apply. Usually, earnings are not subject to state taxes either.
• Additional state benefits may be available for contributions to specific state-sponsored 529 plans, such as income tax deductions, tax credits and other benefits.

Custodial accounts (UGMA/UTMA)

• Eligible for annual gift-tax exclusion of $13,000 (in 2009) for individuals or $26,000 for married couples who consent to split gifts.
• Earnings are taxed at the child's income tax rate until investment earnings surpass $1,900 (in 2009) or until the child turns 18, or for children whose earned income does not exceed ½ of his or her support, 19 (24 for full-time students).

Coverdell Education Savings Account (ESA)

• Earnings are federal income tax-free when used for qualified education expenses, otherwise earnings may be subject to tax and a 10% penalty may apply.
• Contributions are not tax-deductible.
• Eligibility for contributions phases out for joint filers with incomes between $190,000 and $220,000, and for single filers with incomes between $95,000 and $110,000.

Mutual funds

• Long-term capital-gains rates may apply to capital-gain distributions, if any. Special capital gains rates apply through 2010 (does not apply to mutual funds held within retirement plans such as a 401(k) or IRA).
• Dividends may be taxed to individuals at qualified dividend rates (through 2010, under current law) or ordinary income tax rates depending on the funds' income.

Stocks

• Realized gains, if any, may be subject to short- or long-term capital gains taxes.
• Dividends may be taxed at qualified dividend rates to individuals (through 2010 under current law).

Corporate bonds

• Interest is taxed at ordinary income tax rates.
• Profit, or capital appreciation (loss), is taxed as a capital gain (loss).
• Generally, market discount on the purchase of the bond that accrues during the holding period is taxed at ordinary income tax rates.

U.S. government bonds

• Interest is exempt from state and local taxes but not federal taxes.
• Profit, or capital appreciation (loss), is taxed as a capital gain (loss).
• Generally, market discount on the purchase of the bond that accrues during the holding period is taxed at ordinary income tax rates.

U.S. government agency bonds

• Subject to federal taxation.
• Interest may not be exempt from state and local taxes.
• Profit, or capital appreciation (loss), is taxed as a capital gain (loss).
• Generally, market discount on the purchase of the bond that accrues during the holding period is taxed at ordinary income tax rates.

Municipal bonds

• Interest is federal income tax-free. However, interest on private activity bonds, other than those issued in 2009 and 2010, is subject to the alternative minimum tax.
• May be state and local income tax-free if issued by the state in which the taxpayer resides.
• Profit, or capital appreciation (loss), is taxed as a capital gain (loss).

Personal trusts

Depending on the type of trust you choose, a trust may do one or more of the following:

• Potentially reduce probate costs
• Help reduce estate tax liability
• Facilitate charitable giving with potential tax advantages