I Wonder? What does Tax Now. Tax Later. Tax Advantage Mean?

Where does my money go? How should I make sure I keep my money and know how it’s taxed.  Let’s take a look at the following tax treatment on different types of investment accounts.

 Let’s take a look at the following tax treatment on different types of investment accounts.

1. Tax Now: As you save you pay annual taxes.
2. Tax Later / Deferred: Tax later means the money you put in is pre-tax.  You will pay tax when you do withdraw the money.
3. Tax Advantaged: Tax later means the money you put in is pre-tax.  You will pay tax when you do withdraw the money.

What suggestions to you where I can save my money? The following is a list of tax treatment on different types of investment accounts.

1. Tax Now Savings Accounts:
   1. CHECKING
   1. SAVINGS
   1. CD
   1. STOCK
   1. MUTUAL FUND
2. Tax Later Savings Accounts:
   1. 401k/403(b)
   1. IRA/SEP-IRA
   1. ANNUITY
   1. PENSION
   1. LONG TERM CARE BENEFIT
3. Tax Advantage Savings Accounts:
   1. ROTH-IRA
   1. 529 COLLEGE SAVINGS
   1. MUNICIPAL BOND
   1. HEALTH SAVING ACCOUNT (HSA)
   1. LIFE INSURANCE

In summary, Tax now means that any earnings from these accounts you must pay tax in that year. Tax Deferred or Tax Later means the money you save today is not taxed during this calendar year, i.e. you have not yet paid income tax on. When you do withdraw this money, you will pay income tax on the amount your withdraw the money. Tax Advantaged means you generally won’t pay tax when you withdraw money from your account. Tax-advantaged investment money is after-tax money because you have already paid taxes on it. Roth IRAs, 529 College Savings plans, TFSAs, and Life Insurance are popular investment vehicles that get tax-exempt distributions. So the question is, should you avoid paying tax now and defer it until later when you get closer to retirement age? Or should you pay now and not worry about tax in the future? This is a question you need to ponder.  Our goal is to empower you to make well-informed decisions and choices for your future. We want you to live with security, confidence, and certainty without fear. Want to chat?  Me too! Call 1-415-793-7979 or email me marywongins@gmail.com.