Municipal bond income: A fixed-income investment that generates interest payments that are generally exempt from federal taxes. Another tax-free option for saving for retirement is a Roth 401 (k). Tax-exempt accounts offer future tax benefits instead of tax breaks on contributions. Retirement withdrawals are not taxable.
Since account contributions are made with after-tax dollars, meaning they're funded with money you've already paid taxes on, there's no immediate tax advantage. The main benefit of the tax-exempt structure is that investment returns increase and can be withdrawn completely tax-free.