Now what? Are you stuck with only contributing to tax-favored accounts?
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There are plenty of options for you to keep building wealth if you bring home a big check. Here are five investment options for high-income earners.
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Depending on the size of your IRA and your tax rate, that could be a pretty hefty bill. Know that up front. I like the sound of that!
And you can repeat this process year after year. Pay the taxes on the money you invested. Then watch it grow tax-free.
Repeat every year. Health Savings Account A health savings account HSA is both a savings and investment account that gives you not one, not two, but three tax breaks—if you use it right! To qualify for an HSAyou must have a high deductible health plan. In the short term, an HSA acts as a tax-advantaged emergency fund for healthcare expenses.
To sum up, here are the pros and cons of investing in an HSA.
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Triple tax break: You can invest in an HSA with pretax money, enjoy tax-free growth, and avoid taxes if you use the money in retirement for qualified medical expenses. No required minimum distributions RMDs : Traditional k s and IRAs require you to take a certain amount of money from your retirement accounts every month Uncle Sam wants his share of that tax money! You can withdraw money on your own schedule. When you retire or when you leave a company, you can take that after-tax k money and put it in a Roth IRA where you can continue to grow wealth.
Advantages of After-Tax k Contributions: Automated contributions: Every time you get paid, you can sweep some of that money into your investment account. Putting your savings on autopilot is a great way to consistently build wealth.
Access to mutual funds: Invest in the same mutual funds where you invested your pretax dollars. Simplify your life: Keep all or most make money fast with no contributions your investment dollars in one convenient make money fast with no contributions k.
Brokerage Accounts Brokerage accounts—also called taxable investment accounts—allow you to purchase basically any type of investment: stocks, bonds, mutual funds and exchange-traded funds ETFs. You can open a taxable investing account with a bank or brokerage firm directly. And you can even set option 60 seconds entry automatic withdrawals from your bank into that investment account each month.
There are some pros and cons to taxable investment accounts. Here are a few to think about. Advantages of Investing in a Brokerage Account: No contribution limit: With a taxable investment account, you can invest as much as you want each year. Flexibility: You can take money out at any time for any purpose without having to pay income taxes or penalties. This flexibility is important if you want to retire early and need an income stream.
No required minimum distributions: You get to decide when and how much you want to withdraw. Disadvantages of Investing in a Brokerage Account: No tax breaks: You invest with after-tax money, and you pay capital gains taxes when you withdraw money. Liability: Investments made in a k and other similar accounts are protected from a lawsuit. Real Estate Another investment option many people choose is real estate.
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This kind of investment is the most hands-on and time-consuming of your investing options. Before you buy, do your make money fast with no contributions.
Also, talk to an insurance agent about any liabilities you might have, especially if you invest in rental property. And never, ever borrow money to buy real estate. Only purchase it if you have the cash on hand. A middle-ground option for real estate is purchasing land.
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The outskirts may become a new subdivision before you know it! As with investments, do your homework before you purchase land. Advantages of Investing in Real Estate: Tried-and-true investment: If you play it right, real estate can become a wonderful source of income. Diversify your portfolio: Diversification spreading out your money over different types of investments is one of the most important ways to build wealth while minimizing risk.
Disadvantages of Investing in Real Estate: Time consuming: Real estate is a hands-on, all-consuming investment. Liability: Just like the stock market rises and falls, the value of your property can change depending on what happens in the area surrounding it.
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Work With an Investment Professional Whether you're a high-income earner or just getting started in your career, always trading binary options in 1 minute with your investment professional before you choose any of these investing options. They will help you determine the best options based on your income and investing goals.
They know the IRS rules for income restrictions, contribution limits and catch-up options for investing. These decisions are too important to go it alone. Get a pro on your team! SmartVestor is a free service that immediately connects you with up to five investment professionals in your area. These guidelines will help you simplify the process and move forward with confidence. Wealth is the sum total of assets things that you own that give you financial security.
And the good news is, anyone, on any income, can build wealth. Get started today with our investing playbook.
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