Investors are often concerned about minimizing transaction costs that can eat into their gains, without realizing that taxes can take an even bigger bite out of returns. Tax-aware investment management offers some protection. This is an active investment approach that aims to maximize after-tax returns. It relies on careful construction of a portfolio and proactive
Investors looking for an easy way to buy a diversified portfolio used to opt for mutual funds. Today, exchange-traded funds (ETFs) are an increasingly popular option offering several benefits. Both vehicles invest shareholders’ combined money in a broad set of assets, which provides the safety of diversification without the stress of buying and selling individual
It’s a sad fact of the tax code that the more money you make, the more you owe to the tax man. That’s especially true if you’re self-employed and paying the entire 15.3% Federal Insurance Contributions Act (FICA) tax for Social Security and Medicare yourself. Investing in real estate, however, can bring in extra income
Since health savings accounts (HSAs) were introduced in 2004 as part of the Medicare Prescription Drug, Improvement and Modernization Act, they have surged in popularity as a flexible way for numerous Americans to reduce taxable income and save for future medical expenses. But since the IRS establishes new rules governing HSAs each year, it’s important
Saving for retirement in tax-deferred vehicles is a great way to reduce your tax burden today. But it’s also important to limit the tax bite out of your hard-earned savings later by creating a stream of tax-free retirement income. By most estimates, income tax rates will likely rise in the future. Current rates set in
As the costs of higher education continue to rise, many parents worry about how they will pay for their kids’ educations without requiring them to borrow staggering amounts in student loans. In order to save for future tuition expenses, some families use a tax-advantaged tool called a 529 plan. While 529 plans offer a variety
Saving for retirement in a traditional Individual Retirement Account effectively shelters income from taxes while you’re in your high-earning years. But a Roth IRA, which allows withdrawals tax free in retirement when tax rates may be higher, is also appealing. If you haven’t balanced your investments in both types of accounts—or if you couldn’t start
Most investors are familiar with the idea of allocating investments across different asset classes to diversify portfolios and manage risk. It’s also important to balance savings across a mix of taxable, tax-deferred and tax-exempt accounts. Why? Simply put, investing for tax efficiency lets you keep more of your money. The first rule of investing is
When the Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted on January 1, 2020, it implemented some of the most significant changes to retirement plans that have been made in over a decade. One of these changes came as a disappointment to many IRA owners: the requirement that non-spousal beneficiaries of “stretch
If you are 70 or about to hit that milestone, you’ve just gained more options in managing your retirement income. As of January 1, 2020, you can now delay taking required minimum distributions (RMDs) from retirement savings until age 72. Previous rules required distributions after age 70.5 from IRAs or employer-sponsored retirement plans such