It's not hard to realize that money accumulating in an account will grow more if it's not taxed on an annualized basis. If you are in the accumulation phase (building wealth), maximizing contributions to tax advantaged/tax deferred or tax free accounts is important. Not taxed versus taxed is much better. Take a look.
Contribute $3,600. into an account that is taxed each year, with an 8% rate of return and being in a 25% marginal tax bracket and over 30 years, you will have about $322,000. Not a bad investment plan.
Now, contribute that same amount to a tax deferred/tax free account with the same rate of return and time frame and your account will have $476,000! That's an increase of $154,000! A 48% increase!!!
Tax deferred or tax free is much better than taxed. See your financial planner or find a financial planner to discuss this in more detail. Need a financial planner? Call us at 717-431-9299 and we'll help you find a great one... we work with several of the very best professionals in the area.
Mortgage Planner, gives sound financial advice.
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate
Ken, interesting post. I've been of the mindset to just pay the tax now as I plan on being filthy rich and in a higher tax bracket when I am older due to all of my investments. Does that make any sense to you or am I being illogical? I mainly invest in real estate with some stocks so I have a lot of tax write offs now.
May 15, 2008 02:13 PM
Rainmaker
90,936
90,936
Ken Pederson
Certified Mortgage Planner
Real Estate Resources
Recent Posts
Home Buying
over 6 years ago
Home Selling
over 6 years ago
ActiveRain Community
almost 8 years ago
Ken Pederson, a mortgage lender and Certified Mortgage Planner in Pennsylvania, talks about wealth accumulation and mortgage advice.
Comments(1)