Hi Reader,
One of the most important decisions in financial planning comes down to choosing when you want to pay taxes.
Most people focus on what to invest in. Far fewer think about where to invest.
Yet the account you choose can have a bigger impact on long term wealth than the investments themselves.
Tax Deferred
- You get the tax break today.
- Your contributions grow without annual taxes and you pay income tax when you take the money out in retirement.
Tax Free
- You pay taxes up front.
- The account grows without taxes and qualified withdrawals in retirement can be completely tax free.
- Roth IRAs, Roth 401(k)s, 529 plans, and HSAs all fall into this category and can be incredibly powerful when used correctly.
Why This Matters
- Two people with the same investments can end up with very different outcomes depending on whether they saved in tax deferred or tax free accounts.
- Once you understand both options, you can mix them intentionally and build a more resilient retirement plan.
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David N. Waldrop, CFP®
Owner of Bridgeview Capital Advisors, Inc. a Registered Investment Advisor.
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