Saving for retirement is not limited to tax-deferred savings and I believe it is easy to overlook their importance in a well-rounded financial plan. Taxable accounts should, imo, be considered proactively as part of a comprehensive plan, rather than as a default option after maxing out your other retirement accounts. In 10 Reasons You Need a Taxable Investment Account on Physician's Money Digest this week, I've got some thoughts on how and why they should be used to grow your wealth.
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10 Reasons You Need a Taxable Investment Account
My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clientsTags: None -
Well done, Johanna. I'm a big fan of the taxable account; I've got as much in mine as all other investment accounts combined.
One additional piece I would add is tax-loss harvesting, which you alluded to with #7. TLH could be the subject of several articles. I've written a bit about my experiences with it, as has WCI, but I really need to sit down and write a how-to guide.
Best,
-PoF -
Great article
As a super saving W2 employee, the vast majority of my net worth is in taxable investment accounts
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I have a lot more assets in taxable accounts. I think that will be typical for most physicians since there are so many limits on the amounts allowed in tax-deferred / tax-free accounts.Comment
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Another gem from you, Johanna! Thanks for a very concise and informative piece. Have a q: what does #8 mean?… income from your taxable can be used to offset unused investment interest deduction. Would you please give an example? Thanks!
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Investment interest is an itemized deduction (schedule A) and can be used only to offset investment income. Otherwise, it carries forward indefinitely until used up. Here are a few examples that may be applicable to WCI readers:
- Borrowing money from your business
- Interest on the purchase of a share in a partnership or corporation
- Margin interest on your investment portfolio
It's not too difficult to build up tens of thousands in investment interest that is just sitting on your income tax return, unused. Because a taxable account throws off dividends, interest, and short term capital gains, these can be used to offset investment interest. You can also make an election to offset long-term capital gains against investment interest.
My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clientsComment
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I unintentionally wrote a nice companion piece to Johanna's article. How to Minimize Tax Drag in a Taxable Brokerage Account, also @ Physician's Money Digest.
If accepted, I will also have a guest post here on WCI about some bad choices I made when I started one, and how I got out of those.Comment
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As a solo physician who could not afford to support unwilling employees who did not want retirement savings but had the "want money right now" attitude, >80% of all my savings is in taxable accounts. I only have a small 401K when I worked with a group for 5 years, and non deductible IRA that I paid with after-tax money.Comment
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I unintentionally wrote a nice companion piece to Johanna’s article. How to Minimize Tax Drag in a Taxable Brokerage Account, also @ Physician’s Money Digest.
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Great minds? Or something else?My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clientsComment
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I unintentionally wrote a nice companion piece to Johanna’s article. How to Minimize Tax Drag in a Taxable Brokerage Account, also @ Physician’s Money Digest.
If accepted, I will also have a guest post here on WCI about some bad choices I made when I started one, and how I got out of those.
Click to expand...
Thank PoF- that was a good article and well-written!Comment
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Very useful concepts, jfox, to understand. One quibble: Medicare adds surcharge of 3.8% to LTCG , thus top rate now 23.8%
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Yes, you're right. Could be called the "phantom" LTCG rate. As for #11, that is a good one. I guess having a list that goes to 11 won't spoil the soup, will it? I think I'll add it and post to my blog.My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clientsComment
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