We all like, we love it, and we want some more of it! Right?
College tuition, new cars, down payments on homes, retirement…all things we worry about, plan about, stress about, and SAVE FOR!
We hear a lot about the different money “buckets”: 401K’s, Pension Plans, Profit Sharing Plans, Money Markets, Stock Markets, the super market…(just checking if you’re paying attention), but what other markets are available? Or, better yet, what other “buckets”?
As you see above there are three “money buckets”: Tax no, tax later, and tax never.
Tax now buckets mean you invest money into the market after you’ve paid income tax on that money, then you pay tax on the interest when you pull that money out.
Tax later means you invest pre-taxed dollars, then when you pull the money out you pay the income tax rate of the year you pull the money out on the original investment and the interest. (These are important investments to have, but think of what will happen to the interest in 2025 versus 2017. Do our income tax rates usually decline, or increase?)
Tax never means the money you put in is money you’ve paid income tax on, and the interest you accrue will never be taxed…it’s tax free…it’s FREE money!!
Not everyone qualifies for a ROTH IRA, you have to make under a certain threshold of income, and you are capped at an annual contribution.
Your next option is a life insurance policy. There are MANY life insurance policies out there. From term life to whole life, to indexed life insurance policies.
The money is in the index. Farmers offers what’s called an Index Universal Life Policy. This policy serves as a death benefit for your family/beneficiaries, as well as a retirement option. The policy is tied to the S&P 500 and can garnish anywhere from 0-10% interest. It’s a safety net policy, which means that it caps at 10%, but the floor is 0%, which can save you money. Other money markets can drop below zero and actually lose your money.
In the end, you will accrue cash that you can pull against at NO INTEREST, you won’t pay income taxes on this money.
If you throw all your money into one bucket, or even two, and one bucket gets knocked over, you just lost all or 50% of your investments. Utilize these buckets, tap into all three of them, take advantage of the money out there!
As always, call me if you have any questions, or are interested in seeing what your options are.