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How to Invest Money Today for Tax Free, Tax Deferred, and Taxable Growth

hey guys it's Justin good brother

financially simple so I'm gonna let you

in on a concept that I'd use whenever

I'm working with our long-term clients

or clients that we're gonna work with

for years and years and years and years

the idea is this how do we position our

money today so that in the future we

have the most favorable tax income or

most stable income for tax purposes

coming to us so there's a triangle I use

so at the pinnacle of this triangle

there is a tax status which I love above

all things but it's called tax-free

earnings so the idea being is that we

place money into an account today and it

grows and it grows tax-free and whenever

we use that way off in the future we're

not gonna have to pay income tax on the

earnings that we've made which could be

a lot money right I mean we could take

and put a hundred thousand dollars that

couldn't have been worth a million

dollars in the future and nine hundred

thousand of it having to pay tax but I'd

rather that be tax-free so how do we do

that

well the most popular and perhaps my

most favorite style to count as a Roth

IRA you know with a Roth IRA you place

the money into the account after taxes

so we don't get a tax deduction now but

that money grows tax-free from this

point to the future I mean like forever

tax-free dollars you cannot get better

than tax-free

but don't just stop with a Roth IRA you

can also use a Roth 401k maybe you're

one of the lucky ones who have a for a

Roth feature on your company's 401k if

so it's a great opportunity another tax

free account that people often use is an

HSA or health savings account now an HSA

we can place money into the account get

a tax deduction many times invest the

dollars and as a long as we use it for

qualified expenses the earnings that we

have and the principal come out tax-free

again tax-free dollars who doesn't want

it right yeah another we can use this

College accounts like a 529 plan or an

ESA and educational savings account

sometimes you call them a cover L

account those two accounts you can place

money into it and it grows tax-free as

long as you use it for proper education

Pence's the fourth one and this one you

gotta be careful with it I bring it up

because you're probably gonna hear this

video any type of strategy on tax-free

money it's one that's often salt so I'm

gonna give it to you with caution

in my opinion for 98 percent of people

this account is not it shouldn't be

considered but there are some people

that may consider this a viable option

and that is a cash value life insurance

policy so the idea is is that you're

going to put money into a life insurance

policy and the cash value of that policy

is going to grow whether or not it's

invest in the market or an index or a

general account an insurance company and

then some time way down the future

you're going to start taking the money

out of that investment account or that

account within the policy the cash value

account and if done properly then you

get tax-favored treatment so you can

take the money out of the account out

paying taxes again that's for very very

few people out there in the country the

second point on this triangle is what's

called tax deferred it's where we take

our monies that we most the time I've

never paid taxes on and we invest it

somewhere and it grows tax-deferred to

later in the future and now when we

start to use the money we're gonna pay

income taxes on you know the most

popular one is probably your for 1k or

your IRA it's funny you've never paid

taxes on you put the money in pre before

tax pre-tax dollars and now the money

grows and the account grows and grows

grows sometime in the future when you

retire you're going to take the income

out of that account you're having

taxable at that point so you defer the

tax another one that many people are

running into now is real estate you know

a lot of people are investing in real

estate these days and they're behind a

property making some money on and then

they're doing what's called a 1031

exchanges where they're taking their

profits of one weird piece of real

estate and they're moving it to another

real estate piece of real estate without

pain

deferring the tax whatever you do that

at some point the future you're gonna

pay taxes that's a tax deferred account

annuities are all positive people take

some money place it into an annuity and

by the nature of the annuity it'll grow

tax-deferred in this some time in the

future you'll pay taxes on so the second

point of triangle is tax defer the third

point of the triangle is present taxable

as taxable every year the most common

one that you and I probably both used as

our savings account so let's say we put

a thousand dollars in the savings

account and we found this magical things

again their paces 10% interest right

typically so put a thousand bucks in

there and now that savings account is

made a hundred dollars well in the year

the bank is gonna send us a form that

has to be filed with their taxes saying

we made a hundred bucks in interest this

year and it's gonna go on our tax return

and we're good and that's gonna be

including our income and we're gonna pay

taxes this year or that county here on

that income that's a taxable style

account so another popular count is a

brokerage account and that's where you

take cash you place it into an account

and you buy stocks bonds mutual funds

REITs etc and in this account let's say

you put ten thousand bucks and now in

that year you're buying and selling and

you're getting dividends and you're

getting interest off these various

things

well that counter here again the

investment company is gonna send you a

form that you gotta follow your tax

return saying you make X number of

dollars in interest or capital gains and

that's right pay taxes on that year

so those are taxable accounts so why

does all that matter well some point in

the future your net worth you're gonna

use it for income and it makes sense for

us to position that income so that we

can not pay a ton of taxes in the future

so sometimes I'll see people who have

all of their money in tax deferred

accounts see guys let's move some later

taxable accounts let's mouselina

tax-free accounts other times I'll see

people have all the running tax-free

accounts and that sounds great to have

it all on IRA and I wish we can put all

the money there there's many times those

clients are not gonna be able to reach

their goals without having some taxable

dollars or some tax deferred dollars so

the tax triangle is just an idea that

allows clients to see where they're at

it allows the planner to say based on

the way your asset mix between tax-free

taxable tax deferred based on the way

your asset mix is here's what your

future income is going to look like why

does that matter

well there's a question that I often ask

myself that is do I think that taxes

will go up or down in my lifetime

I don't know about you but I have a

feeling that Washington and all their

infinite wisdom is not gonna cut taxes

very much that's my personal opinion

you may differ this fine so guys it's

Justin Gabriel financially simple

remember life is hard money can be

complicated unless at least continued to

make our lives so guys life is

complicated life is hard finances don't

have to be let's continue to make our

lives at least financially

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