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10 Reasons You Need a Taxable Investment Account

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  • 10 Reasons You Need a Taxable Investment Account

    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.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

  • #2
    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

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    • #3
      Great article

      As a super saving W2 employee, the vast majority of my net worth is in taxable investment accounts

       

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      • #4
        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.

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        • #5
          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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          • #6
            11. If you do not have a taxable investment account, you are not saving enough.

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            • #7
              Great summary Johanna.  I second Vagabonds point that if you don't have a taxable account you are not saving enough.  I have never had the opportunity to open multiple retirement plans but I always saved into the taxable account.

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              • #8
                Third vagabond's point!  Nice article.

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                • #9




                  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!
                  Click to expand...


                  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.

                   
                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                  • #10
                    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.

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                    • #11
                      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.

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                      • #12




                        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.
                        Click to expand...


                        Great minds? Or something else?
                        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                        • #13




                          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!

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                          • #14
                            Very useful concepts, jfox, to understand.   One quibble: Medicare adds surcharge of  3.8% to  LTCG , thus top rate now 23.8%

                            #11. appreciated assets in a taxable account are ideal for charitable giving, including a DAF.

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                            • #15




                              Very useful concepts, jfox, to understand.   One quibble: Medicare adds surcharge of  3.8% to  LTCG , thus top rate now 23.8%
                              Click to expand...


                              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.
                              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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