Core Insights - The impact of federal and state income taxes on retirement planning is often underestimated, potentially reducing retirement savings significantly without proper planning [1][2] - A $1 million portfolio in a 401(k) or traditional IRA may only be worth $800,000 or less after taxes, highlighting the importance of tax considerations in retirement accounts [2] Tax Strategies - To mitigate tax impacts, individuals are encouraged to save and invest more during their working years, allowing for extra funds to cover taxes [3] - Being tax-smart with investment choices can help minimize tax liabilities upon reaching retirement age [3] Tax-Free Income Sources - Roth accounts, including Roth IRAs and Roth 401(k)s, allow for tax-free withdrawals after age 59 ½, making them an effective tool for avoiding taxes on retirement funds [4] - Contributions to Roth accounts are taxed upfront, which can be beneficial to avoid larger tax bills during peak earning years [5] - Inheritances can serve as a tax-free supplement to retirement savings, although reliance on them as a primary retirement strategy is not advisable [6][7]