subject: When To Use Taxable Accounts For Retirement Planning [print this page] Taxable accounts still have their place in retirement planning, even if older investors have access to a good number of tax-advantaged venues for saving and investing for your golden years. While it does make much more sense to contribute or invest in IRAs and 401Ks, there are some reasons why it would be advantageous for workers to look beyond these accounts.
If you have contributed the maximum annual amount to your retirement account, you can place money in other accounts that do not provide the tax advantages IRAs and 401Ks come with. Typically, tax-deductible contributions to your 401K cannot go beyond $16,500 per year (or $22,000 annually for older investors 50 years old and up).
Roth IRAs and conventional IRAs also limit your contributions to $5,000 yearly (or $6,000 with catch-up contributions) for this year. If you are a relatively well-off worker who can afford to save more than these amounts in your IRA, 401K, or Roth IRA, you can still invest, although you will no longer have the tax benefits these accounts provide. In addition, the coming of the New Year allows you to contribute to your tax-advantaged accounts with a clean slate.
Your income influences how much or how little you can contribute. Tax-deductible IRA contributions are impacted by the adjusted and modified gross income for the tax return of that year. Big earners may have to use taxable accounts for some of their investing and saving.
Taxable accounts do not have limits in terms of contributions, so they afford the senior investor a lot of flexibility. There are also no limits on the amounts you can withdraw and how many times you can withdraw money from these accounts. This makes a taxable account a good tool for investing at least a part of your funds.
If you want to put money into tax-free investments, such as some bonds, you cannot use tax-advantaged retirement accounts, according to law. These investments need to be made using ordinary taxable accounts.
While tax-advantaged investment strategies are a good way to ensure that you keep most of your money intact for retirement, taxable investing can be a productive part of your overall financial plan. There are some valid reasons why you should invest using taxable accounts, one of which is that they may also be facilitated by the same firms that mold your IRA or 401K. This allows for further savings as you can get discounts or waived trading fees aside from helping you strengthen your retirement planning.
by: Katherine Smith
welcome to Insurances.net (https://www.insurances.net)
