A Guide To Tax-Efficient Investing

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Any time you make money from your investments you need to consider the impact taxes might have on your earnings.

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What is tax-efficient investing, and how does it work? By understanding the tax implications of different types of accounts, you can determine the most tax-efficient strategies for your portfolio.

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Investment accounts can generally be divided into three categories based on how they’re taxed. Here are the three main account types

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Taxable accounts are also called brokerage accounts or investment accounts. A taxable account has no special tax benefits.

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A 401(k), 403(b), traditional IRA, SEP IRA, and Simple IRA fall under the tax-deferred umbrella, a tax structure typical of retirement accounts.

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When you contribute money to a tax-exempt account, you use post-tax funds — money that’s already been taxed.

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A highly effective method for minimizing the tax impact on your investments is by diversifying your portfolio.

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A Guide To Tax-Efficient Investing

Any time you make money from your investments you need to consider the impact taxes might have on your earnings.

What is tax-efficient investing, and how does it work? By understanding the tax implications of different types of accounts, you can determine the most tax-efficient strategies for your portfolio.

Investment accounts can generally be divided into three categories based on how they’re taxed. Here are the three main account types

Taxable accounts are also called brokerage accounts or investment accounts. A taxable account has no special tax benefits.

1. Taxable Accounts

A 401(k), 403(b), traditional IRA, SEP IRA, and Simple IRA fall under the tax-deferred umbrella, a tax structure typical of retirement accounts.

2. Tax-Deferred Retirement Accounts

When you contribute money to a tax-exempt account, you use post-tax funds — money that’s already been taxed.

3. Tax-Exempt Retirement Accounts

A highly effective method for minimizing the tax impact on your investments is by diversifying your portfolio.

Tax-Efficiency Through Diversification

TO LEARN MORE ABOUT THIS POST, VISIT RADICAL FIRE

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