If there is one element in reaching higher income brackets that becomes a barrier to more focused investment, it is taxes. We fully understand how those with higher incomes are taxed at higher rates, so finding tax-free strategies is an important step to enhancing how you grow your wealth.
Even with changing statutes and tax laws, there can be some consistent ways that you can save for a secure future while also increasing your income. We wanted to share some of what we’ve learned about tax-free options that can help increase earnings and performance with your savings, an important step to having the type of financial future you are seeking.
Why it’s important to check taxation
First, let’s start with why it’s important to consider a tax-free savings option. The goal is to have as little taxation taken out as possible, so going for options that aren’t even on the table is where you want to be.
The main reason is that taxation takes away the money you are earning – it’s that simple. This money goes to the government and not into your back pocket. Any growth that might take place will be lost if that money’s growth is cut off.
It can also be a substantial investment, depending on what you are investing in. Having double-digit growth being taken away and going to the government can make progress slower and even more difficult.
Some ideas to consider
You have three different tax-free options that are also excellent choices for future savings. Here’s a look at each one:
529 savings plans
While these accounts are meant for beneficiaries, you can change that anytime, and even take money back without any penalties. Among the distinctive benefits of a 529 are no gift taxes and the ability to raise the average limitation amount to $75,000 per year.
Roth IRA 401(k) or 403(b) accounts
The Roth is the industry standard for a reason, although it’s with a catch: there are limitations on what you can contribute annually. This is why the 401(k) or 403(b) may be best, since there is a higher ceiling of $20,000 annually. Taxes are possible if it’s withdrawn, but you reach significantly higher accruals with these Roth options.
TFSAs
This stands for Tax-Free Savings Accounts, and the most significant benefit is penalty-free withdrawals. Any money removed can be returned to the TFSA in the following calendar year. With broader freedom to contribute, it can also significantly increase your capacity for consistent appreciation of those funds.
Differing journeys to greater wealth
Savings are an important step to building high growth in your finances, and there are other techniques we can show you, including several with little or no taxation involved. If you are an accredited investor, physician or dentist, you can increase your wealth with a customized solution that works for how you lead your lifestyle. All it takes is a plan that is tailored to your growth.
Intrigued by the possibilities? To learn more about our methods, go to our website.
