As you know from last week's post on tax - efficient investments, I have a decent chunk of
money in my taxable investment account and that will continue to grow at a decent pace until retirement.
Besides potentially maxing out your employer retirement account and IRA, maybe you're also able to save even more
money in a taxable investment account.
Not exact matches
What's more, using
investments from a
taxable account first for withdrawals leaves your
money in tax - advantaged traditional and Roth
accounts, where it has the potential to grow tax deferred or tax free.
But if you're putting
investments (or cash)
in a
taxable account for an unspecific future goal while your 401 (k) or other retirement
accounts languish unfulfilled, you're just throwing away
money.
The
money for an
investment property is
in taxable accounts, while the retirement assets are not.
In reply to your comment that, «each [account] has their own investment objectives and time lines, so in my opinion should be treated separately,» I'd make the case that you may be able to save some money on taxes by considering your taxable accts and retirement accts as one portfoli
In reply to your comment that, «each [
account] has their own
investment objectives and time lines, so
in my opinion should be treated separately,» I'd make the case that you may be able to save some money on taxes by considering your taxable accts and retirement accts as one portfoli
in my opinion should be treated separately,» I'd make the case that you may be able to save some
money on taxes by considering your
taxable accts and retirement accts as one portfolio.
Total the amount of
money you currently have set aside
in all your retirement
accounts: 401 (k) s, traditional IRAs, Roth IRAs, even
investments in taxable accounts earmarked for retirement.
Rather, we should emulate a tricycle or a three - legged stool, spreading our retirement
money over all three of employer pensions, government benefits and private savings
in registered and
taxable investment accounts.
You could put
money in a regular
taxable mutual fund or brokerage
account, paying taxes on your
investment income every year, and racking up more tax liability when you sold your shares after their value had risen.
If you have been setting
money aside for college expenses
in a traditional
taxable investment account there may be some last minute moves you can do with those assets to save on taxes.
The upshot of all this is that people who expect to be
in the 25 % bracket or higher during their retirement years should strongly consider a Roth conversion even if the rate of tax on the conversion is as many as ten percentage points higher, provided they can pay the conversion tax with
money that would otherwise remain
in a
taxable investment account and their
investment time horizon is a long one.
If you want to use your
investments for other goals and access the
money sooner, you need to keep it
in a
taxable investment account.
What I mean is that your dividend incomes (and other
investment income) from
taxable and retirement
accounts will likely grow over time, you may end up earning more than you spend (meaning you will end up saving
money in retirement).
Of course, it can be hard to predict what tax rate you'll face
in the future, which is why I think it's reasonable to diversify your tax exposure by having some
money in both traditional and Roth retirement
accounts (not to mention
taxable accounts with
investments that generate much of their return
in capital gains that will be taxed at the lower long - term capital gains rate).
The minimum
investment requirement (the least amount of
money you'll need to assemble a Powerfund Portfolio)
in a regular
taxable account is currently $ 42,000 (as of 7/1/10).
So if you do it right you won't have to pay much
in the way of taxes on your
investments even if they are
in taxable accounts until retirement when at the very least you will have a lot more flexibility
in managing your
money and very likely be
in a lower tax bracket.
You can do this yourself
in any
taxable investment account, but there is always the risk of losing
money so always keep that
in mind.
You'll likely need to save
money in a
taxable account, such as an
investment account,
in addition to a workplace retirement
account or IRA.
That's potentially better than having that
money in a regular,
taxable investment account where earnings are taxed each year, because tax - deferred compounding allows
money to grow faster.
In this case you can use these rules to move the
money from an
account where the
investment earnings are tax - deferred (but
taxable when withdrawn) to a Roth IRA, where the earnings will be entirely tax - free if you wait long enough.
This eliminates the necessity of pulling
money out of your retirement
investment accounts when the stock market may be depressed or
in a
taxable situation.
When it comes to retirement planning, retirement
accounts that are tax - deferred can have a big impact on your retirement savings, by allowing your
money to grow quicker than if it were
in a
taxable investment account.
Any
money you invest
in the stock market or other
investments, and even the
money you leave
in a savings
account earns interest that is
taxable by the IRS.