Monday, December 11, 2006
Simple Sequence of Investment Accounts
Tax takes a significant bite from the investment return, hence the difference in the sequence of putting money into different types of investment accounts.
(1) Roth Accounts
Includes Roth IRA and Roth 401(k). Roth Accounts will be on the top because the flexiblity and the earnings are tax-free.
(2) 401(k) and 403(b)
With or without employer match, these are tax-deferred accounts.
(3) Traditional IRA
May not be tax-deductable for higher income household. However, there is a reason to open this account before 2010. The tax law allows conversion to Roth no matter what income level. Do it while you can.
(4) College Savings for Children
This is the sequence I choose: 529 Plan, UTMA, ESA. Each type has its advantage and disadvantage, depends on income level.
(5) Regular Accounts
Offers no tax advantage. Aim for long term capital gains and dividends, which are taxed at 15%.
(1) Roth Accounts
Includes Roth IRA and Roth 401(k). Roth Accounts will be on the top because the flexiblity and the earnings are tax-free.
(2) 401(k) and 403(b)
With or without employer match, these are tax-deferred accounts.
(3) Traditional IRA
May not be tax-deductable for higher income household. However, there is a reason to open this account before 2010. The tax law allows conversion to Roth no matter what income level. Do it while you can.
(4) College Savings for Children
This is the sequence I choose: 529 Plan, UTMA, ESA. Each type has its advantage and disadvantage, depends on income level.
(5) Regular Accounts
Offers no tax advantage. Aim for long term capital gains and dividends, which are taxed at 15%.
# posted by SIMPLE FINANCE @ 10:47 PM 
