Use a taxable account for retirement savings? | FinTips

Today we’re talking about the taxable account and how to use it for retirement investments. We’ll focus on the tax consequences like long term and short term capital gains as well as when you get taxed as ordinary income. A taxable account can be a great addition to your retirement investment strategy after using all the tax advantaged accounts.

Hey dustin tivitz financial advisors are here with jazz wealth we’re not going to use this today so let’s just put that out of the way that’ll help get this going how’s it going hey we’re financial advisors here at jazz wealth and we work with your long-term investments could be retirement base you could be just investing for property or something in the future

Your kids whatever it may be we help you out with that we do the investing for you and all of our portfolios are right on our website so you could check them out there of course expense free no cost to those and i hope you’ll check us out at jazz wealth calm okay enough of the sales pitch let’s get started you know what happens a lot to me people save money

In their roth’s right and so we’re investing for on they’re putting some money away and about this time of year usually august september they go yo i put up up to the limit in my roth what am i supposed to do now right i put the six thousand in there for this year and i’m a young guy i want to save more i have other goals well a lot of times it’s the individual

Account and a lot of people sort of shake off the individual account they go no no no i don’t want to get taxed out but on these things i go this is sort of a somewhere where we’ve been misled it’s people were scared of them because they don’t know how they actually work they’re just a little bit more complicated than the traditional ira or 401k or whatever and so

I just want to spend a few seconds here going through this with you and then i will get out of your way to do this we’re gonna go over to the charts here all right in a taxable account you owe taxes now the type of tax will vary you can have anything you like in there there’s no rules or anything like that but you need to know how the taxes work so in a taxable

Account you’re gonna have things that either appreciate in value all right they may be paid a dividend or let’s say you had bonds in there you put some bonds in there and they pay interest right so there are other ways you can make money but let’s just go through this here for this case here so you’ve got different products in there they either grow or lose value

They pay a dividend or they have interest now you’re either gonna pay long term capital gains short-term capital gains or you’re going to pay ordinary income let’s say so these are a couple different areas here if we break it down like this all of a sudden snot soaked up right here’s how this works if you own a stock and it appreciates in value congrats right

See also  What is a Short Straddle & How to Trade?

You bought something that you put $10,000 into ford for some reason and now it’s worth eleven thousand dollars if it’s been less than one year one year you’re going to owe short-term capital gains on the appreciation you’re not double taxed a lot of people think this i don’t know where this came from but a lot of people say i don’t want to be double taxed i put

In post tax money when it comes out i got taxed on all that money again not true you only pay tax on the growth and this sort of fair right the uncle sam’s just saying look if you make a few dollars we just want our piece and we want to break down and help you understand what their piece really is so short term capital gains are actually taxed at your ordinary

Income so for example if you’re in the 22 percent tax bracket you bought something you put ten thousand in you made a thousand dollars you owe two hundred twenty dollars if you held it for less than one year if you held it for greater than one year and you’re gonna pay long-term capital gains and most of you are going to owe fifteen percent if you happen to earn

A ton of money over four hundred thirty something thousand dollars then you’re gonna actually owe twenty percent if you happen to be a single person you earn less than like thirty-nine thousand five hundred or so then you’re gonna owe nothing on long-term capital gains but in general if you hold a stock for more than a year in a day you only owe fifteen percent

On the long-term capital gains okay so most people are gonna be fifteen percent if you decide to day trade that thing and you make a thousand dollars awesome good job took you a day to make a thousand dollars you’re just gonna go whatever your tax rate is so if you’re in a twenty four percent tax bracket of course you get it you’re gonna make twenty you’re gonna

Owe two hundred forty dollars on that thing okay so under no case here when you have something that appreciates or depreciates in value under no circumstance are you gonna ordinary income tax just for the short-term capital gains you get how that works but that’s the end of the deal right so that’s it if you buy something or it doesn’t matter if you buy a bond or

Whatever it is that you do that’s that’s where you land on that one no i’m a little distracted because i was thinking of something i wanted to include i haven’t included in other videos these short-term capital gains can be offset by capital losses so are you a day trader are you someone who actively trades and you buy something you check in on it every couple

Weeks and then maybe a sell it if it hit your target or maybe hit a stop loss if you’re racking up losses and you’re racking up gains those numbers work together so you get to add up all your losses add up all your gains those numbers together equal either hopefully i hope you make some money right let’s say you got a capital gain you’re gonna owe taxes if

See also  Responses to the Great Depression

They’re all short term capital gains capital losses then they add up and whatever the difference is you will always corn your income if for some reason they add up to a loss you had a rough year and you lost like $5,000 you can actually use that on your tax return you can you can’t put it all on there but you can let’s say you lost $10,000 think it’s $3,000 that

You can use on your tax return and the irs will say hey the rest of it will just carry it over to next year and the rest of it will carry it over to next year so you actually get to use that don’t just think like oh i’m gonna pay all this money on gains you’re not gonna win on every trade you know that right you got it okay here we go stocks that pay dividends

So if you have dividends in a stock even if you reinvest them that if the stock pays the dividend you are going to or ordinary income tax could be capital gains it just depends on what type of dividend it is qualified or non-qualified dividend okay so even if they pay it to you and you do not take the money you put it back in a stock you’re still going to owe

Either ordinary income or are you gonna owe some kind of capital gains like i said it depends on the type of cap the dividend that you get paid you can look on box 1a and 1b of your 1099 div and you can see the difference in there if that helps you on that case now if you have interest bond interest let’s say it’s bond interest well you tax an ordinary income

There so you’re gonna pay ordinary income you want to think about that it may not make sense for you to have bonds on an individual account i get it people want to make their own decisions but you may want to think about that right because you’re gonna pay ordinary income what happens you’re making some money you’re doing well maybe you’re actively trading over

Here and now all of a sudden you’re cut your tax in the 24% bracket right your marginal tax rate you don’t get to say well i was at 24 and to take some discount credits and things like that and so i’m effective tax rate is whatever no no it’s your marginal tax rate so if you’re in the twenty four percent tax bracket you make a thousand dollars in interest for

Some reason on bonds you’re gonna owe two hundred forty dollars okay that’s how that one works now what else did i want to cover did i cover everything on that one oh with the dividends so the biggest thing i want you guys to know is that those dividends of course when they’re paid to you the irs says well you got paid we want to get paid we don’t care if you

See also  China Is About To Cause A Global Recession

Didn’t take the money and physically go spend it at chipotle we just know that you got paid the money we want to get our money now as you’re going through on this a lot of people in an individual account they do this so wrong stay with me here this is a big one they look at their account and they go i’m a long-term investor right some time passes where they’re

Using some sort of automated service and they go you know what click rebalance i i wanted to have so much of each thing and it’s a little out of whack rebalance don’t do that right think about it when you rebalance it means that you made money in something and maybe you lost some money over here and so your portfolio is out of whack well by rebalancing you’re

Selling the winners and put thing putting them into the losers you just volunteered a capital gain maybe long term maybe short term we don’t know what it is but you you just volunteered a capital gain instead i want you guys to look at it this way if your portfolio gets a little out of whack consider using the dividends from this and instead of reinvesting them

In your winners invests the dividends in your losers that’ll help bring your portfolio now maybe not a lot but it’s going to bring it back in balance so that’s probably the biggest tip of this thing i see if people do this all the time dustin should i rebalance this thing no you got dividends coming in let’s take these dividends put them over here and that to

Help rebalance a little bit if you could so i hope this helps just wanted to come to you real quick i’m sure i said something wrong if i did you can bash me in the comment section but if i did well by you today maybe you’ll hit the subscribe button you’ll hit the thumbs-up button whatever does it for you if you do that for us that really does it for us what we

Like that one there hey and come back later we do the closing beat five o’clock eastern every day it’s a live stock market update show we just sort of go over what happened share with you all the interesting things and welcome to ask questions there is as as you like we’ll be back later today enjoy the rest of your day do it why should you choose jazz wealth as

Your retirement or long-term investing service our portfolios are managed by us not some faceless mutual fund manager our private classes will teach you everything about investing and getting your dough straight best of all our fiduciary standard means your best interests comes before ours

Transcribed from video
💰 Use a taxable account for retirement savings? | FinTips 🤑 By Jazz Wealth Managers