We have many choices when investing. Today, we are going to look at the different ways an account may be taxed: now, in the future, and never again. Given these choices, we might think the “never taxed again” structure is best and the “taxed now” is worst, but there’s much more to the story.
The markets do not care what stage of life you are in. I know that sounds funny, but we can sometimes think we should invest differently because of something going on in our own life.
Your Savings Target is the amount you want in savings so by definition, anything above this amount should be invested in your Long-Term Portfolio.
I know that might sound odd as we tend to save throughout our working life and even sometimes well into our retirement years. But there will be times you need to withdraw your savings and it’s important to consider the tax implications.
The goal with taxes is not to pay the least amount of tax – it’s to keep as much as you possibly can. There are lots of strategies out there designed to minimize taxes, and unfortunately, many of them also minimize what you take home.