The importance of electing the maximum contribution amount to these savings plans cannot be overstated. To the extent your employer matches any portion of your contribution, it becomes even more important to contribute. Receiving an employer match is the same as receiving an annual increase in pay. Some plans permit additional contributions from after-tax compensation. Both the money contributed and the plan's earnings are accumulated tax-free until they are withdrawn.
Posttax contributions are nontaxable when withdrawn.
Individual Retirement Accounts. Separate IRA accounts are established for each spouse. For tax law changes that will allow larger contributions to spousal IRAs in 1997, see Chapter 1 . 4. Although the contribution is not deducted from taxable income, the earnings on the contribution are not taxed until they are withdrawn. This often-overlooked opportunity can provide significant benefits if used consistently for several years.