What are the tax implications of investing through Empower?

Investing through Empower can have various tax implications depending on the type of account you utilize and the nature of the investments you choose. Generally, Empower offers different types of investment accounts, including traditional IRAs, Roth IRAs, and taxable brokerage accounts, each with distinct tax characteristics. For traditional IRAs, contributions may be tax-deductible, which can reduce your taxable income in the year you make the contribution. However, you will be required to pay taxes on any withdrawals during retirement at your ordinary income tax rate. On the other hand, contributions to Roth IRAs are made with after-tax dollars, meaning they do not reduce your taxable income at the contribution time. However, qualified withdrawals during retirement can be taken tax-free, which is an attractive feature for many investors. If you invest using a taxable brokerage account, you may be subject to capital gains taxes when you sell investments for a profit. The tax rate depends on how long you held the investment before selling. Long-term capital gains, which apply to assets held for more than one year, are typically taxed at lower rates than ordinary income. Dividends received from stocks may also be taxable, although qualified dividends benefit from lower tax rates. It is essential to consider the tax implications of your specific investment choices and overall financial strategy. Tax laws can change, and individual circumstances can greatly affect tax situations. Therefore, individuals may want to review their tax strategies and potential liabilities based on their unique situations. For more specific information on tax implications, it may be helpful to consult the current information available on Empower’s website.