You’ve Funded Retirement and Emergencies - Now Where Should Your Money Go?
Where to Put Your Extra Money
You are maxing out your retirement plans. You’ve figured out your college funding. Plus, you have enough money for emergencies and upcoming expenses. But what should you do with any extra money?
Invest in Your Long-Term Portfolio in a Taxable Account
What is a taxable account?
A taxable account is one that taxes earnings. It is usually titled in your Family Trust, in your name, or under joint ownership with your spouse. The money you invest is not taxed because you have already paid income taxes on it. You must report any earnings you make in this account as taxable income each year.
How It Helps Lower Your Lifetime Tax
Retirement accounts, such as Traditional and Roth, help reduce your lifetime tax. A taxable account can hold investments that pay low dividends and have small gains. Here are the benefits of using a taxable account:
- Hold growth investments: Analysts expect these investments to increase in price.
- Delay taxes on gains: You won’t pay taxes on those gains until you sell them in the future.
- Flexibility for withdrawals: You can withdraw money without penalties. Keep in mind that you may owe taxes on any gains.
Keep in mind that your tax strategy should match your risk tolerance. Try to limit high-dividend investments in your taxable account.
Your Thoughts?
So, what do you think? Do you have significant balances in taxable accounts? Is that a good thing or a bad thing? Are you maximizing strategies for your financial situation?