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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 -
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...
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)
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)
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...
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
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
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
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
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
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
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!
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!
