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Tax Now, Tax Later, Tax Never

January 01, 2023

Tax Now, Tax Later, Tax Never

Tax season is coming up, and we are sure you have questions. Wondering if you have to pay taxes on savings accounts? Do I have to pay taxes on my checking account? When is a ROTH IRA taxed? How are annuities taxed? Income tax diversification can help you position your income tax efficiency and increases your total spendable income.

These are important questions that require succinct and thorough answers, and we at IntentGen can help. Learn more about what is taxed now at IntentGen, or contact us if you would like to learn more.

Tax Now

Essentially, different types of investments are taxed at different times. Tax Now Assets are liquid and are positioned for shorter needs or needs that are more relevant. They include certificates of deposits as well as U.S. treasuries. Learn more about whether you need taxes on your savings account, and which types of accounts are taxed now:

  • Checking Accounts
  • Savings Accounts
  • CDs
  • Mutual Funds
  • Stocks
  • Dividends
  • Bonds

Be sure to recognize that the list only considers income tax treatment, meaning that it may be considered for state and federal estate or inheritance tax.

Tax Later

Now, allow us to go over the investments and accounts that get taxed later. Tax Later assets are generally earmarked for longer-term investments such as retirement funds, traditional IRAs, annuities, and qualified plans. Check out if you are taxed on a ROTH IRA, and then check out the other assets that are taxed at a different time. 

  • IRAs
  • 401(k)
  • 403(b) and other retirement plans
  • Variable Annuities
  • Fixed Annuities
  • Stocks (Capital Gains)

Taxed Never

Assets such as preferential income-tax treatment as well as accumulated value and income-tax treatments are never taxed. These are funded by after-tax dollars, and include:

  • ROTH 401(k)
  • Municipal Bonds
  • Life Insurance Cash Value
  • 529 College Saving Plans
  • Health Savings Accounts

Roth, Roth 403b, HSA and 529 plans have specific requirements to be tax free. If you have any questions about this, we would be happy to help. 

Time Diversification vs. Investment Diversification

The other aspect to learn more about is the difference between time diversification and investment diversification:

Time Diversification

Time diversification is important if you are considering investing in short-term and long-term goals throughout your and your family’s life, such as a new home, retirement funds, travel funds, college education for your children, and charity funds. Once you get a better idea of the time diversification throughout your life, you will be able to make a better decision when it comes to making tax-efficient investments to help you reach your financial goals.

Investment Diversification

Investing diversification is the means of allocating investments across a wide range of asset classes. This is a great way to minimize risk and protect you from inflation but is not quite complete in terms of protecting you from general losses. Creating a diversified portfolio is a great idea for those who have multiple goals with different time horizons. 

Learn More at IntentGen

Our entire process has been designed around one simple goal: We empower clients to live with greater purpose by making the right financial decisions at the right time. Our vision is to become the financial partner for thousands of people, helping them save, spend, protect, grow, and give their resources—all with an eye toward the people, places, and things that matter most. Learn more about our Impact & Scale as well as our Core Values today.