When putting together the puzzle of what you hope retirement will look like, it’s important to fit just the right pieces in the right places. What types of accounts you have and how much you have in them can change the entire look of your puzzle picture and your tax outlook.
Tax Triangle
1. Before Tax Accounts – Examples: 401(k), 403(b), pensions. Taxation: 100% taxable upon withdrawal, similar to a paycheck
2. After-Tax Dollars – Examples: Bank accounts, stocks, mutual funds, ETFs.
Taxation: Partially taxable through capital gains or dividends. Annual taxes on growth depending on distribution.
3. After-Tax Dollars with Zero Tax – Examples: Roth accounts, municipal bonds, cash-value life insurance.
Taxation: 100% tax-free when used, providing significant value for the right individual.
Tax diversification provides you with flexibility. By aligning your financial pieces, we can help you complete the puzzle of your retirement vision.
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