A study determined that high tax-bracket traders who had held taxable mutual funds were losing 25% of their earnings to taxes each year. And bond funds' returns were proven to have lost almost 40%. This loss to taxes may be imputed in part to how portfolio managers control the tax liability that is passed on to shareholders. Simply because each time the fund supervisor claims a distribution, such as an interest payment or perhaps a short-or long-term capital gain, it flows through to your taxed revenue. And this happens even if you never withdraw any cash. Therefore, in case you presently do not need the revenue from an investment, why pay taxes on its income? Why don't you reduce taxes?
According to the earlier mentioned study's conclusions, if you invest $100,000 in a bond fund that yields 6%, you'd lose up to 40% to taxes. And you will end up getting a 3.6% after-tax return. After 5 years, your account might be worth $119,344. However, an investment that allows interest to collect tax-deferred, such as a fixed annuity, with a five-year 5% rate would increase to $127,628. The added income on your net worth statement, $8,000, is basically the reduced taxes that are still in your control earning for you. All of this does not imply that bond money are bad investment opportunities. However , depending on your current and long term requirements, a fixed annuity can be great alternative. The interest rate is locked in for a period which you pick, your principal is assured by the claims paying ability of the issuing company, and also you manage when to pay taxes and thereby reduce taxes.
You can get a free booklet that describes how annuities can be utilized in several methods to reduce taxes.
You Pay More Taxes Than NecessaryAnd we guarantee your CPA has never told you The problem with paying taxes is that most people overpay. So if you are concerned about having enough in retirement, you must stop overpaying taxes. I know you think your CPA takes care of this for you. WRONG. I AM a CPA (retired) and I can tell you that 90% of CPAs do nothing more than enter your information into the little boxes on the tax return but NEVER tell you how to pay less next year. Why? Many of them simply do not know what we can show you. In ten minutes.
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