Two things in life are guaranteed..

Death and taxes

But get this

Did you know you can grow your stock portfolio tax free?

This is

"Tax Free Growth in the Market"

- THREAD -

1.

New investors tend to wonder if they should start with a brokerage account or a individual retirement account (IRA)

What's the difference?

Taxes

But don't worry Uncle Sam will still get his share...

2.

Unlike the IRA

Your brokerage account (Robinhood, TD Ameritrade, Fidelity) doesn't offer you tax benefits

You're taxed on the money you make (capital gains and dividends)

3.

Meanwhile you have a few options with IRA's

To keep it simple we'll only be discussing Traditional & Roth IRA's

A Traditional IRA means your contributions are "pre-tax" (can be tax deductible)

A Roth IRA's contributions are "post-tax" (don't pay tax when you withdraw)

4.

The Roth IRA is popular because you don' pay taxes when you withdraw your money

Think of it as paying taxes on the seeds you plant, but not on the crops you harvest

With a Traditional IRA you'll be paying taxes on the crops...

5.

Knowing this now, you might be asking yourself

"Why doesn't everyone start with a Roth IRA?!"

As great as they may be

They do have some drawdowns

6.

IRA's have contribution limits

Under 50 - $6000/yr
Over 50 - $7000/yr

Your brokerage accounts has no contribution limits

But you'll pay capital gains (varies on your tax bracket)

Short term ranges (less than 1 yr) - 10-37% tax

Long term ranges (over 1 yr) - 0-20% tax

7.

So how can you use this to your advantage?

Most people would tell you to use your brokerage account for short term trades

And your IRA for long term investments

I'm here to tell you otherwise

8.

Sure you would be limited by yearly contribution limits

But you wouldn't be taxed on those gains

You could then use your brokerage account as more of a long term holding account

This way you would be taxed the least amount possible on your gains

9.

This would be a win-win situation for you as the investor

So then

Where can you open an IRA?

It's pretty easy actually

Nearly every broker these days offers an IRA (Vanguard, TD Ameritrade, Fidelity, etc)

You can choose the one who's platform you like the best

10.

Now that you know this

Are you going to be investing your money differently?

Most people have both a short term and long term accounts

This is a great way to build your both accounts at a low tax rate

Thank you for taking your time to read this

There are many ways that you can reduce your tax bill

Just a matter of finding the tricks to do so

I hope you all enjoyed and learned something from this thread on wealth building!