Saving for the future is of paramount importance to all Americans. Luckily, we all have a rich uncle to turn to for some help. His name is Uncle Sam.

Thanks to the tax code, you have several ways to save that are either tax-free or tax-deferred. Here’s a look at 10 popular savings options.

Individual retirement accounts

Known popularly as IRAs, for more than 30 years, these accounts have provided individuals a way to save for retirement and save on taxes. Anyone who works, either for himself or an employer, can set aside a portion of that income in a personal retirement account.

Over the years, the concept has been refined, with tax savings and earnings possibilities enhanced. Generally, individuals with wage income (rather than self-employment earnings) will choose to contribute to either a traditional IRA or a Roth IRA.

1. Traditional IRAs

“Traditional IRA” is the name given to the original account created in 1974. This account is available to anyone younger than 70½ who earns money. The contribution limit for 2007 is $4,000; money can be put into these accounts for last tax year up until the April 15 tax-filing deadline. In 2008, the yearly amount that can be contributed to a traditional IRA increases to $5,000, with an an annual inflation adjustment for subsequent years.

  • Advantages: The earnings are tax-deferred, meaning you won’t owe the IRS until you make withdrawals, which you can start taking at age 59½. Workers age 50 or older (but younger than 70½) can put in another $1,000 a year. Some individuals also might be able to deduct these contributions.
  • Drawbacks: You’ll eventually owe taxes on at least some of the money in the account. You cannot contribute once you reach age 70½. When you reach that age, you must start taking out a minimum amount based on an IRS distribution calculation.

2. Roth IRAs

Roth IRA contributions were first accepted in 1998. That year, $8.6 billion went into these retirement plans, with another $39 billion transferred from traditional IRAs to Roths. By 2001, IRS data showed contributions to Roths had passed the amount going into traditional accounts.

Why the shift? Money earned in a Roth IRA can be taken out in retirement tax-free. Contribution limits for Roths are generally the same as with traditional accounts, with one major difference: As long as you are earning money, you can contribute to a Roth, regardless of your age.

  • Advantages: The earnings are tax-free. This is very appealing to account holders who open a Roth early and let the money grow for decades, as well as to individuals who expect to be in the same or possibly higher tax bracket when they retire. You can contribute at any age. You can take money out on your timetable, not on the IRS’s age 70½ withdrawal schedule.
  • Drawbacks: Contributions are not tax-deductible. There is an earnings limit which restricts higher-income taxpayers from contributing to or converting traditional IRA money to a Roth account.

Workplace retirement savings

Many companies help their employees save for retirement by offering defined-contribution plans. As the name indicates, workers play a major role in building retirement savings by contributing a percentage of their incomes to these accounts.

3. 401(k) plans

In the private sector, these are commonly known as 401(k) plans ; when the employer is a university, nonprofit agency or some government agencies, they are known as 403(b) plans. In some cases, the employer matches a portion of worker contributions.

  • Advantages: Employee money goes into the account before payroll taxes are figured, meaning you’ll save a bit on withholding taxes. Matching employer contributions help boost your retirement savings. You can put substantially more in a 401(k) than in an IRA. In 2007, the limits were $15,500 vs. $4,000, respectively; for 2008, the amounts are $15,500 for 401(k)s and $5,000 for IRAs. Larger contributions are allowed in both types of retirement plans for individuals age 50 or older.
  • Drawbacks: Contributions and earnings are tax-deferred, meaning you’ll owe the IRS when you take the money out at retirement. You must begin distributions by age 70½. Not all companies match worker contributions, and some that do match do so with company stock rather than cash.

4. Roth 401(k) plans

Roth 401(k) plans became available in 2006. These accounts combine the basics of 401(k)s with the tax-free aspect of Roth IRAs. Essentially, workers put money into Roth 401(k)s after payroll taxes are withheld, meaning the account doesn’t offer an immediate tax benefit. But when the money is withdrawn, it is tax-free.

  • Advantages: Distributions are tax-free. Contribution levels, as with regular 401(k)s, are higher than for IRAs. Employer matching contributions increase your retirement savings. There are no adjusted gross income caps, so higher-income workers who might not be able to open a Roth IRA can contribute to a Roth 401(k). You can leave money in the account past age 70½.
  • Drawbacks: Not yet as available as regular 401(k) plans. Because money goes into this account after taxes are withheld, you get no immediate tax break.

Whether your 401(k) is a regular or Roth account, ultimate responsibility for your workplace retirement savings rests entirely on you. You must enroll in the account and then manage it, deciding which 401(k) offering best fits your personal financial situation. These concerns were addressed in provisions of the Pension Protection Act of 2006. Now companies will find it easier to automatically enroll workers in 401(k) plans, as well as make investment advice on plan choices more available to employees.

5. Medical spending accounts

They might be called flexible spending accounts, or FSAs, but whatever the name, these workplace benefit plans can help you save on medical and child care costs.

With a medical spending account, you can put aside money to pay for health care costs that are not covered by your insurance.

  • Advantages: Employee money goes into the account before payroll taxes are figured, so your withholding taxes will be slightly less. FSA money pays for out-of-pocket medical expenses (co-pays, deductibles) you would have to pay anyway. You can use your FSA money even before you’ve actually put money into the account. For example, let’s say you sign up to contribute $1,000 to your medical FSA, but have deposited only $100 when you are faced with a $300 out-of-pocket expense. You still can collect the $300 from your account. Also, you can use FSA money to pay for over-the-counter medications.
  • Drawbacks: Companies limit the amount you can put into your medical FSA. Unused FSA money does not roll over into the next benefit year.

6. Dependent care spending accounts

Similarly, a dependent care FSA allows you to put aside money to pay costs for the care of an IRS-eligible dependent while you work.

  • Advantages: As with a medical FSA, contributions are made pretax. In addition to paying for child care costs, the money also can go toward expenses to care for a physically or mentally disabled adult dependent so that you can work.
  • Drawbacks: When applied toward child care, the youth must be age 12 or younger. Under federal law, you can only put aside $5,000 to cover dependent care costs. This is a household limit, meaning that if you and your spouse each have a dependent care FSA at your jobs, the total amount put in both cannot exceed $5,000. The same $5,000 limit applies to single filers.

And while FSAs generally offer individuals a very tax-advantageous way to save on medical and dependent care expenses, in some cases other tax deductions or credits could be disallowed or reduced by use of these accounts. If you have extreme medical costs that you can deduct or want to claim the dependent care tax credit, talk to your tax adviser about how these accounts could affect these other tax considerations.

7. Health savings accounts

Money placed in a health savings account also pays medical costs, but these medical savings vehicles are different from FSAs.

In order to open an HSA, you must be covered by a high-deductible health insurance policy, which means you’ll have to pay medical costs of at least $1,100 for self-only coverage or $2,200 if for family coverage. Once you have the requisite insurance coverage, you can open an HSA and contribute up to the amount of your insurance policy’s deductible. Individuals age 55 and older can make additional catch-up contributions to the HSA each year until they enroll in Medicare.

  • Advantages: You get an immediate deduction on your Form 1040 for contributions to an HSA. You do not have to itemize to claim this deduction. Even if someone else, for example, a relative, makes the contributions to your HSA, you still get the tax deduction. HSA earnings grow tax free. As long as HSA funds pay for eligible medical expenses, you owe no tax on the distribution. Any money in the account at year end can be carried forward to the next year.
  • Drawbacks: You have to pay a high deductible for medical care, meaning you’ll have to come up with the doctor and pharmacy payments and then be reimbursed from your HSA, rather than having your bills go directly to the insurer for payment as with traditional health policies. If you get a high-deductible policy during the year instead of at the beginning, the amount you can contribute to an HSA is prorated by the number of months you’ve had the policy.

College savings plans

These savings vehicles, named after Section 529 of the Internal Revenue Code and known collectively as 529 or qualified tuition plans, come in two flavors: prepaid tuition plans and college savings plans. All 50 states and the District of Columbia sponsor at least one type of these plans.

8. Prepaid tuition plans

With a prepaid tuition plan, you can pay for attendance at participating public colleges and universities in advance, generally many years before the student actually enrolls.

  • Advantages: Prepaid plans allow you to buy a future education at today’s cost — a sizable expected savings given the rate of increase over recent years. The plans usually are guaranteed or backed by the state.
  • Drawbacks: Since many prepaid tuition plans are under the aegis of state governments, they generally have residency requirements, meaning your college choices could be limited. The plans also have age and grade limits for the beneficiary student. In most cases, only tuition and mandatory fees are covered in prepaid plans.

9. College savings plans

With a college savings plan, you establish an account to pay for a student’s future college expenses.

  • Advantages: Withdrawals from college savings plans can generally be used at any college or university, regardless of its location. Distributions for eligible college costs are tax-free. Savings plans will cover a wider range of expenses than prepaid tuition programs; this includes room, board and books in addition to tuition and fees.
  • Drawbacks: As with any investment, risk is a factor; the plan money is not guaranteed by the associated state government and is not federally insured. If you use account money for ineligible expenses, you’ll owe federal taxes on the amount as well as an additional 10 percent penalty on earnings. Savings in a 529 plan could reduce a student’s eligibility for other financial aid. Pay close attention to the plans fees, which could take a substantial cut of its earnings.

10. Savings bonds

This savings vehicle is often viewed as old-fashioned, but today’s savings bonds are not the bonds your grandparents or even your parents bought. Enhancements to these federally backed instruments make them attractive to many looking for an easy, safe and, in some instances, quite competitive way to sock away cash. The most popular savings bonds are Series EE, the fixed-rate variety, and Series I, which is indexed periodically to inflation.

  • Advantages: The purchase price of a Series EE bond is just half its eventual maturity value. Both EE and I bonds come in eight denominations, ranging from $50 to $10,000. You can buy bonds directly from the U.S. Treasury at the department’s TreasuryDirect Web site. Interest earned is exempt from state or local taxation. Federal taxes are deferred until you cash the bond, but if you redeem them to pay for higher-education expenses, you might be able to also avoid federal taxes on the earnings.
  • Drawbacks: Unless the bonds are used for college costs, you’ll eventually owe the IRS for the accrued earnings. The Series I bond does not offer a half-price purchase option. You must hold both types of bonds for at least one year before you can redeem them. Both series charge a three-month interest penalty if you redeem the bonds during the first five years. You need to pay attention to when you cash in the bonds, because the redemption timing affects the amount of interest you’ll get.

Don’t try this at work

There’s one more tax-related savings option that many people use, but it’s not recommended by most financial advisers: paycheck overwithholding.

Many employees intentionally have an excess amount of federal taxes withheld from their pay so that they’ll get a fat refund at tax time. But if you adjust your withholding so that it more accurately matches your ultimate tax bill, you’ll have immediate use of your cash. That way, you can put it into a savings account where it can earn more for you, instead of letting Uncle Sam have your money for most of the year as an interest-free loan.

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