Tax-advantaged investing is very good for most people at most times
A previous article, “The Solution - ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that individuals are much better off with a well-considered financial viewpoint. A stable set of financial beliefs can help you to keep focused and on track throughout your life. This follow-up article discusses the value of tax-advantaged investing and how VeriPlan can model personal lifecycle taxes to improve decision making.
You should understand the specific potential economic benefits of tax-advantaged investing within the context of your particular projected lifecycle financial affairs and tax situation.
You should invest in tax-advantaged investment vehicles, when you are more likely to gain a net long-term after-tax benefit. For the majority of people, this will be most of the time.
How VeriPlan Can Help:
VeriPlan has extensively automated the projection and analysis of your tax-advantaged investments across your lifecycle. Giving full control to you, VeriPlan’s projections incorporate a detailed lifecycle model of your family’s federal, state, and local personal income taxes plus your other taxes, such as Social Security, Medicare, and property taxes. (See: VeriPlan helps you to decide what your lifetime tax-advantaged and tax-deferred investment strategy should be)
VeriPlan differentiates your projected assets by their taxability status using three account classifications: 1) regular taxable accounts, 2) traditional tax-deferred accounts, and 3) Roth ‘never-taxed after contribution’ accounts. VeriPlan enables you to control automatically how much of your future earned income and of your employer’s potential contributions would be deposited into your taxable and tax-advantaged accounts, including traditional and Roth IRAs, 401k, and other plans. (See: Traditional versus Roth tax-advantaged plan contributions)
VeriPlan automatically applies taxes on asset distributions and withdrawals, as appropriate, depending upon whether your assets are subject to current taxation, future taxation, or no taxation. In addition, VeriPlan automatically projects asset withdrawals from your tax-advantaged asset accounts in retirement to meet your projected living expenses and to conform to tax rules regarding mandatory withdrawals from traditional tax-deferred accounts.
Because VeriPlan instantly develops for you projections that incorporate a customized personal tax model, you can use it to compare the lifecycle economic impacts of different tax avoidance strategies. For an example of a tax-related decision that you cannot make without such a robust model of your lifecycle financial affairs, see this discussion of the factors that influence your decision whether to make current contributions to Roth or traditional tax-advantaged accounts: Factors that tend to favor Roth tax-advantaged plan contributions (Part 1 of 2) and Factors that tend to favor Roth tax-advantaged plan contributions (Part 2 of 2).
Tags:
401k,
earned income,
financial affairs,
financial strategies,
investment strategy,
irs,
personal income taxes,
property taxes,
roth iras,
tax advantaged investments,
tax benefit,
tax deferred,
theskilledinvestor.com
Related Personal Financial Planning Posts
- Risk-Free Investment Money Is Fantasy Money (
For Individual Investors Risk-Free Investment Money Is Fantasy Money
Securities with low investment risk and high investment returns are just fantasies.
No "risk-free" investment money is consistently and reliably available to individuals. Luck dominates skill in the securities markets. Clever investment selection is vastly over-hyped, and only the promoters tend to benefit. On average over long periods, [...])
- May 24 2007 Edition of the Carnival of Financial Planning (
Carnival of Financial Planning - May 24, 2007 Edition
Welcome to the May 24, 2007 edition of the Carnival of Financial Planning.
The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security. This [...])
- I Want My Treasure Back Please (
PIRATES OF THE CREDIT SEA - Part 3: I want my treasure back!! (Please)
What are my rights in the situation that I summarized in my previous article: "PIRATES OF THE CREDIT SEA: My Treasure Is Taken!"? Well, the answer is very simple. I have a contractual right to get my treasure back. I also have [...])
- Use Caution with Classical Investment Books (
Use Caution with Classical Investment Books - A Tip from The Skilled Investor
Individual investors should exercise caution when applying the tactics of classical investment books to current markets. The more handcrafted, seat-of-the-pants, and individual actor approach to the securities markets in the pre-computer, pre-networking era has given way to different practices. What might have worked [...])
- 15 Value-Added Individual Investor Activities (
Before estimating the investment value that you might add or take away from your portfolio, you first need to determine whether your strategies are or are not likely to lead to optimal risk-adjusted investment returns.
This value estimation is separate from any hourly opportunity cost related to spending time on your investments versus an alternative use [...])
- I Write to the President of CitiBank Customer Service (
PIRATES OF THE CREDIT SEA -- Part 5: I write to the President of CitiBank Customer Service
My saga to recover my credit card treasure continues. Previous articles have covered the particulars of my situation, and I will not repeat them.
In summary, for fifteen years I have always done my best to conform to my AT&T [...])
- Investment Valuation and Securities Risk for Individual Investors (
The securities markets provide an evolving consensus of the risk-adjusted value of particular securities.
By understanding how the markets value securities, individual investors can chose more durable investment strategies
Judging the potential usefulness of different investment strategies requires some understanding of what the public securities markets really do. This article discusses how the markets price financial securities [...])
- Always Completely Diversify Your Investment Portfolio (
Complete portfolio diversification is always a better idea.
On average, the securities markets will not pay you to hold any skewed subset of the overall market. Doing so is just a gamble that may or may not pay off. You should not expect to be paid any more for the added risk and anxiety.
A previous article, [...])
No comment yet