4 minute read
Which Investment Account Is Right For You?
Which Investment Account IsRight For You?
Where 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.
Advertisement
TAX DEFERRED INVESTMENT ACCOUNTS
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 By Lesa Artzberger
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. Many people tell me they don’t want to use tax deferred accounts because they perform badly. 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
it later. When your money goes into the account, you get a tax benefit now, which means more of your money can work for you, instead of going to taxes, and when you start withdrawing from this account, you pay taxes on your withdrawals.
TAX-FREE INVESTMENT ACCOUNTS
Tax-free investment accounts are super sexy, and my favorite investment account by far. Tax free investment accounts include indexed universal life (IUL) and ROTH IRA’s. A tax-free investment account is another way the government incentivizes you to look after our own financial wellbeing. With a tax-free investment account, the money you invest is post-tax money, so there is no tax benefit upfront.
The benefit of these accounts is that all income and capital growth produced by your investments are tax-free, you pay no taxes on withdrawal, and you are legally able to invest in these accounts at a higher rate. This is Super Juicy! Because you pay no income or capital gains tax on the investments within these accounts, your money works harder for you and you end up getting higher returns from the same amount of money invested within a tax-free account than outside of the tax-free wrapper. My advice is to max out your annual allowance and keep those funds invested year after year until you are ready to enjoy your retirement. The next big benefit of your tax-free investment account kicks in at this point, because you will not pay taxes on your withdrawals. By investing in a tax-free account in addition to a taxdeferred account, you can structure your withdrawals to minimize your tax base in retirement. While you are building your wealth, it’s important to use both your tax-deferred and tax-free accounts and allowances, which will help you to maximize your tax savings when you retire.
DISCRETIONARY INVESTMENT ACCOUNT
The third type of investment account is a discretionary account. This is the account you use after you have maxed out your allowances on the first two accounts. This account has no tax benefits, yet it is the most flexible and has no restrictions on how much you can invest, when you can access the funds, what the funds can be invested in. Remember, your assets create your freedom, and it’s the quality of your assets, not the quantity that counts.
Lesa Artzberger was in the medical device industry for more than 30 years, and lost half of her retirement in 2001, at risk of market. She learned some effective techniques, to protect/ grow her money, before the market drop in 2008. Lesa is a Financial Specialist and Fiduciary now specializing in assisting women, and their families, to protect and grow their retirement savings. benefitsbyarzberger.com
Visit RealtorTristen.com to see how working with a holistic realtor can transform your home selling and buying experience in ways you never thought possible.
you are extraordinary. exceptional. remarkable. Your real estate agent should be too.
Tristen Campanella REALTOR ® | LIC# 01956277
(760) 310-0166 RealtorTristen.com Tristen@HomeByTristen.com
Enjoy the best skin of your life and the con dence that comes with it.
EASY-TO-USE REGIMENS
WHAT’S YOUR PRIMARY SKIN CONCERN?
• Visible Signs of Aging • Discoloration or Uneven Skin Tone • Sensitivity • Acne, Teen – Adult
100% satisfaction guaranteed.
Mention code EPIC to receive a 10% discount and free shipping on orders over $80!
Lisa Perlmutter INDEPENDENT CONSULTANT
