July 2023
Retirement accounts: Patrice reminds listeners to maximize retirement accounts like a 401(k) or 403(b) to optimize tax-deferred growth. Chris says when one is younger and does not have the professional success yet to pay more in taxes and has more time to invest, it may make more sense to contribute to a Roth account.
Treasury and municipal bonds: Patrice encourages listeners in states with high taxes to consider investing in short-term treasury bonds as they are state tax-free. Municipal bonds are also an option worth considering as they are exempt from both federal and state taxes.
Saving for higher education: 529 plans are a great vehicle for college planning. Investments in a 529 plan grow on a tax-deferred basis and can be withdrawn tax-free if the money is used for qualified higher education expenses.
HSAs: Health Savings Accounts offer tax deductions, allow you to grow that money tax-deferred and take it out tax-free for qualified medical expenses. If you are over 65, you can take money out for any expense and pay regular income taxes on it.
Donating to charity: If you would like to donate to a non-profit organization, you can avoid capital gains when selling an index fund by opening a donor-advised fund for an appreciated asset. It will grow tax-free, and you can donate that money to a charity of your choice.
Another option is a Qualified Charitable Distribution (QCD), which allows individuals who are at least 70 ½ years old to donate up to $100,000 to one or more charities directly from a taxable IRA without having to pay ordinary federal income taxes on that money.
Real estate: Real estate investors should investigate cash-out refinancing, a type of mortgage refinance that replaces your current property mortgage with a different, bigger loan, with the borrower receiving the difference between the two amounts in cash.
Tax-loss harvesting: If you’re paying attention to the market, you can capture losses in a down market that may offset gains in a portfolio.
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Watch previous episodes of THE FINANCIAL COMMUTE here:
Ep. 43 Money Rules to Live By: Fact or Fiction?
Ep. 42 Midyear Market Update: Opportunities in the Second Half of 2023
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.
