Which Investment Account
Is Right For You?
By Lesa Artzberger
here you hold your assets is as important as what assets you actually invest in. There are three main investment account types you can invest in. Here is an overview of what they are and how to use these different accounts to minimize your taxes and maximize your returns.
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enables you to invest some of your actively earned income now to receive a tax rebate. When you contribute to a retirement, pension, superannuation, or IRA account, in addition to the tax rebate, all growth and income generated by the investments within the account are also tax-free.
TAX DEFERRED INVESTMENT ACCOUNTS
Many people tell me they don’t want to use tax deferred accounts because they perform badly.
Tax deferred investment accounts are called many different names but they are all essentially the same. They are pensions, retirement annuities, retirement funding, 401K’s, a SEP, an IRA, or Superannuation. A tax deferred account incentivizes you to invest and build up assets to use in retirement, through a tax deduction. Typically, corporations are given a tax break to offer these accounts to their employees. It is important to take advantage of this opportunity, to not leave money on the table and to contribute only what the company is matching. The government incentivizes you to put some money aside so that you can support yourself in retirement. Typically, this is in the form of a tax deferred allowance that 4 | EpicNorthCounty.com
My advice is that if your retirement account is underperforming, it’s not the account that’s the problem, the problem is how the money within the account is invested. Most tax deferred accounts invest in high-fee, poor performing actively managed funds. This is the reason they underperform. I call these TV dinner investments – bad for your wealth and great for the financial industry that rakes in massive fees. There are ways to protect this money from the roller coaster of the market, by rolling it into a tax deferred index account. This financial vehicle will avoid the high fees, and provide the upside of the market, without experiencing the down-side of the market. The most important thing to understand is that these accounts are tax deferred, not tax free. You still have to pay tax, you will just pay
