You have a choice when to pay income taxes: Now, Later or Never
You have three choices of how you can pay income taxes on savings/investment accounts. Tax Now - Tax Later - Tax Never.
Learn to minimize the risks to your wealth. Taxes are the number one threat to your money. The more you know, the better you will be able to manage the process, protect your interests and prosper in retirement.
Does anyone really want to reduce their standard of living in retirement?
You can offset the tax threats to your portfolio and your future through strategic and proactive tax- centric planning. There are only three ways your income can be taxed:
1. Taxed Now - Each year you pay income taxes on any earnings you receive on the following:
Savings account, Checking account, Stocks, Bonds, Mutual Funds,
Income from Real Estate
2. Taxed Later - Earnings accumulate tax-deferred. You pay taxes when you withdraw your money on the following accounts:
-401(k), 403(b), 457, and pension plans, -Annuities and Savings bonds.
3. Tax Never - Earnings accumulate tax-deferred and may be income-tax free and penalty-free:
-529 Plans if used for college costs within the U.S.
-ROTH IRA's (Qualified distributions from ROTH IRAs are income-tax free and penalty-free. A qualified distribution from a ROTH IRA is one in which the owner has had the ROTH IRA open for five years and has had one of the following qualified events: age 59.5 or older, death, disability, or first-time home purchase (which qualifies for a Roth IRA distribution of up to $10,000).
-Universal Life Insurance death benefit with cash accumulation value. (Death benefit is income tax free to your beneficiaries. Cash value may be accessed income-tax free and penalty-free through loans and withdrawals if the policy is not a modified endowment contract (MEC).
The choices are many and you can explore which may be best for your specific financial situation. The real test is in determining if you qualify for any of these tax savings strategies.
Take advantage of tax savings while you have the option. So many people are stressing their portfolios to make gains and taking unnecessary risks to make up for tax losses. Stop the insanity and utilize these lawful strategies - the wealthy do! Your tax savings are better in your pocket than on that one way trip to Washington!
NEXT- How taxes reduce my financial fitness.