Episode Transcript
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Speaker 1 (00:01):
This is straight talk from the House with certified financial
Planner Tracy and Toon right here on thirteen ten WI
b A. You can learn more about Tracy and the
team all online Tantoninvestment House dot com. That's t A
N t O N Investment House dot com. Great website
and resource as mentioned, and learn more about Tracy in
the team. You can also learn about some really great
(00:25):
stuff when it comes to podcasts, and they've got some
great videos up there on other media as well that
I'll available to you at Tanton Investment House dot comtel
for number six oh eight five zero one fifteen forty nine.
That's six oh eight five zero one, fifteen forty nine.
And joining us this morning is certified financial Planner Tracy
and Toon. Tracy, how you doing this week?
Speaker 2 (00:44):
I'm doing great? John, how about you?
Speaker 1 (00:46):
I'm doing good. It's great to talk with you, and
UH got to kind of go over some of our
outline for today. It's going to be an exciting show.
What are we going to be talking about this week?
Speaker 3 (00:55):
Well, we're going to talk about brokerage accounts and how
investing the ONTO four one K can be a really
great idea. I came across this Fidelity article that was
entireed that the title was investing beyond a four one
K and I love this concept because I feel like
brokerage accounts are underutilized and a lot of people still
don't understand or know that they can open a brokerage
(01:18):
account and the advantages of the brokerage account. So I'm
excited to just share how it can be a really
good thing, not just for you know, today's expenses or
short term expenses or goals that you have, but long term,
how it can really play a good role or a
helpful role in tax planning for retirement.
Speaker 1 (01:37):
Well, it's talked then about some of those benefits, Tracy.
Obviously there's good reason to be talking about this week,
isn't there.
Speaker 3 (01:43):
Yeah, it's just really like I said, I mean, the
brokerage account, it's a really versatile tool. It can help
really with short term, intermediate term, and long term financial goals.
And you can you can pretty much use any kind
of vehicle or instrument. You can use stocks in a
brokerage account. You can use bonds, mutual funds, exchange traded funds, CDs,
(02:05):
even money market funds. So there's a wide range of
investment options. You can use a lot of people you
know steer toward exchange traded funds, which makes sense because
of the tax ramifications of dividends and interest that would
be taxable to you. So you want a low turnover
fund or an exchange traded fund, that's probably the best
(02:27):
to invest in a brokerage account. But we can talk
more about that. But it's just a flexibility sean that
brokerage accounts have, and again a variety of purchases. Let's
say you're you're saving for a car, or you're saving
for you know, your first house, or even an upgrade
in your house. You've got your emergency funds already in
your bank account, and you're thinking, you know, I could
(02:49):
put more money for short term goals, and I don't
want to put it for retirement per se, or I
might not want to use it for retirement. Well, the
brokerage account would be a great place to put it
because then it's like, oh, I can use it for
the I can use it for retirement if I want
to say, I don't need it for a short intermediate
term goal. So it's just a really nice option, really flexible.
(03:12):
You can determine how you want to title the account.
So let's say you're a single person and you're thinking, okay,
well I want to make sure I avoid probate while
you're going to do a transfer on death. Make it
a TOD account super easy to do. It's like you're
putting the beneficiary on there. Brokerage accounts don't typically have
(03:33):
beneficiary designation, so you would want to delineate that by
putting it as a TOD. A transfer on death super
easy to do. You can make it a joint account.
Say you have a spouse or another family member, or
even a business partner. You could make it a joint account,
joint with rights of survivorship where you could say, okay,
I either one of you can act on the account
(03:54):
anytime you want to and and once if one passes,
it just automatic goes to your other to the other
joint owner. So you know, that's usually how I see
those set up, either as a TOD or a joint
And another thing is is sean If you've say you've
maxed out your retirement accounts, you know our brokerage account
(04:14):
can be a great way to continue saving. If you
have extra dollars and you've already done your emergency cash
and you're thinking, you know, I want to get market rates.
Speaker 2 (04:22):
How do I do that?
Speaker 3 (04:23):
Well, a brokerage account it's a great way to do that,
and a lot of people take advantage of yearly they
manage this account in a way, and that's what advisors
do as well. You know, say there's a possitively there's
loss losses in there, Well they harvest those losses on
an annual basis and take that against gains in the account.
So it's another you know, great way to manage your
(04:46):
tax liability inside the brokerage account, and also just optimizing
for asset allocation. I mean a lot of times people
will be adding you know, monthly to this kind of
account or quarterly, semi annual, or just even annually, and
then it's like, okay, well, I'm want to be more
conservative or I want to be more aggressive. You can
be more aggressive in the brokerage account, which typically is
(05:07):
a good idea because growth funds pay out less in
dividends or very little individends, and so that's a great
way to put your growth type of investment style or
those particular funds into the brokerage account and then be
maybe more conservative with the iras. That's what we tend
to do at the investment house.
Speaker 1 (05:25):
Sounds like an amazing tool. As we talked this morning
with certified financial planner Tracyanton right here in thirteen ten
wuiv A. Of course, Tracy mentioned the investment house. You
can learn more about t Anton Investment House all online
the website tantoninvestment House dot com. That's t A N
t O N investment House dot com. Get a great
website resource to get to know tracing the team. You
(05:47):
can also schedule an aployment right online at Tanton investment
House dot com. Telp number six SO eight five zero one,
fifteen forty nine. That's six SOH eight five zero one,
fifteen forty nine. Talking this week about investing beyond A
four and Tracy, as we talk about brokerage accounts, there's
as you were just talking, there's some really great uses
for it. Are there some unknown features or lesser known
(06:08):
features with a brokerage account.
Speaker 3 (06:11):
Well, one beauty of the brokerage account is really that
allows you to contribute any amount you want, since there's
really no minimums or maximums, and you could withdraw the
money anytime you want, you know, as long as there's
cash in the account. So if you have an advisor,
they're going to most likely invest all of it or
at least most of it, and so you'd want to
(06:33):
call them and say, I'm you know, I need I
want to take out X amount and then they would
make a trade and then have the funds available within
like say a day or immediately, and then it would
be sent ah to your bank account. So if you
have a debit card, you're gonna that's also available. For
brokerage accounts, you're going to want to call your advisor
and say this is this is the amount I want
(06:54):
to use and have that in the cash position in
the brokerage account. But again, super easy to to use
because you could no minimums, no maximums, you know, can
take the money anytime. Really flexible, right, very very liquid.
The only thing you worry about is is if you
invest money, Okay, well, you know it is for longer
(07:16):
term in the sense because markets can correct any time,
and we would correct ten percent a year, so you know,
don't put it in there and think, well, in six months,
I'm going to exactly get this or higher, because you
don't know there is market risk if you're investing in
the stocks, So you just have to be aware that, Okay,
do I have a five to seven year time horizon
to invest in this? Yes, I mean I think markets
(07:37):
will do well this way year, but you know, no
one knows for sure. So that's why you want to
have a little bit of longer time horizon just in case.
Speaker 2 (07:45):
Right.
Speaker 3 (07:46):
But another thing Sean I guess is the tax diversification.
So brokerage accounts are taxable, you know, so using it
alongside of four one K or other retirement plans that
can help with more flexible tax strategy. And this can
be especially useful for early retirees who need access to
their savings before each fifty nine and a half when
(08:09):
you would have penalty free withdrawals from traditional you know,
retirement accounts. So like, if you're going to retire and
you're like, okay, I'm going to retire at fifty five, okay,
and you have every dollar that you've saved in a
four to one K or an IRA, well you have
you have a tax issue, right, so you know that's why,
Well I shouldn't say you one hundred percent to have
(08:30):
a tax issue.
Speaker 2 (08:31):
Let's say you're fifty.
Speaker 3 (08:32):
Anyone retire at fifty five, there is a caveat where
with a four to one K you could take out money.
But beyond that, you know, the brokerage account just allows
for some flexible planning.
Speaker 2 (08:43):
And I just love that.
Speaker 3 (08:44):
And when we talk about you know, we get in
the weeds here Sean with Okay.
Speaker 2 (08:49):
You know I need health health insurance.
Speaker 3 (08:52):
Okay, Well, if I put if I take out money,
I might be going over the Obamacare limits tax wise,
But if I have a brokerage account, that's a very
minimal tax. You know, you're only being taxed on the
gain on that account and the dividends and interest so
and you're getting it most likely if you held it
for a year at tex at capital gains rates. So
(09:15):
you know what's cool about that is is a lot
of people put pull money from the brokerage account to
live off of and then they get Obamacare a very
you know, inexpensive healthcare. Because one of the caveats to
retiring early is, oh I can't do that because I
need health insurance.
Speaker 2 (09:31):
Well, guess what if you have a.
Speaker 3 (09:32):
Brokerage account, it's a really easy gig because you can
show very little on your taxes and get a pretty
sweet deal.
Speaker 2 (09:40):
Through Obamacare.
Speaker 1 (09:41):
Sounds great, And we're going to talk a little bit
more about the tax structure and kind of some of
the differences when it comes to a four to one K.
Get to get to that with Tracy in just a moment.
In the meantime, if you haven't been over to the website,
you've definitely got a head in there today. Tanton investment
House dot com. That's t A N T O N
investment House dot com. Again, that's where you can learn
more about Tracy and the team. You can listen back
to this in previous shows podcasts, also some other fantastic
(10:04):
information all available to you online. Tanton investment House dot com.
That's t A N T O N investment House dot com.
Delphy number six oh eight five zero one, fifteen forty nine.
That's six oh eight five zero one fifteen four nine.
Talking this week about investing beyond a four oh one
K and speaking of brokerage accounts and kind of comparing them,
(10:24):
what is kind of that tax structure? Then, I know
he touched on it a bit there. Tax structure compared
to a four oh one K with these brokerage accounts, Tracy, Yeah.
Speaker 3 (10:32):
So unlike four oh one ks. Brokerage accounts are considered
tax bolt, which means you owe tax only on the
gain when you sell the investment for profit, since the
money you used to fund the brokerage account was after
tax money. So if you sell an investment you've held
for less than a year, any gains or tax at
the regular income tax rate, but if you held it
(10:54):
for over a year you get a lower tax rate.
So the long term capital gains tax is zero fifteen percent,
or twenty percent if you have high income. So depending
on your income you know, most of people I see,
it's like zero or fifteen. So while short term gains
are taxed as you know regular income based on your
federal tax bracket, you know, the long term gains aren't.
(11:15):
So unlike an IRA or four one K where you
take out money, it's one hundred percent of those dollars
are taxable. Here, only the gain is tax and it's
taxed at capital gains rich again, which are lower than
ordinary income tax versus a four one K is one
hundred percent taxable ordinary income. Now, the only thing that
you don't get in the brokerage account is you don't
(11:37):
get the deferral like you do have to pay taxes
along the way. Right on any dividends the mutual fund
would pay out any interest or any like money that
Let's say it's a mutual fund and the portfolio manager
sells that, well, that's going to create a capital gain
for you. So that's why you want exchange traded funds
(11:59):
low turnover. Know, no one's managing it per se, and
so it doesn't create a taxable event for you along
the way. So that's that's the caveat there. But let's
say you sell it, well, you got to pay some taxes,
so the deferral isn't there. But again, I love them,
I love the I love the brokerage account. It's just
such a great thing. Along with a four oh one
(12:20):
K and a roth iray. You know, I think I'm
always partial to those as well. So just it's such
a great, great idea. And again you can do some
tax loss harvesting along the way, you can offset some gains.
And when you again invest in mutual funds exchange traded funds,
you know, those are great ways of trying to mitigate
(12:40):
any taxes along the way as you ope, as you
own this brokerage account. So again it's just really flexible
gives you so much more flexibility now and for your
intermediate goals and for retirement.
Speaker 1 (12:54):
It's really cool to hear and you talk about some
of the different different areas there and different opportunities, and
you mentioned in there as well that this is this
is one of it's not the only tool, but one
of the tools out there, and it's a great thing.
As we talk with Tracy, if some of the stuff
is maybe perking your ears of a vin, you're going
that is interesting. Tracy would love to talk. Then you
can learn more about Tracy and the whole team online
(13:16):
the website Tanton Investment House dot com. That's t A
N t O N investment House dot com. Speaking of
making contacting and schedule appointment to right online at the
website or pickup phone call the office six O eight
five zero one fifteen forty nine. That's six SOH eight
five zero one fifteen four nine. We're going to conegue
our conversation with certified financial planner Tracy Anton. We will
do that next as Straight Talk from the House continues
(13:38):
right here on thirteen ten double U I B A.
This is straight Talk from the House with certified Financial
Planner Tracy Anton here on thirteen ten do wui b
A Wellpe you've had a chance to stop buy the
website Tanton investment House dot com. If you haven't yet,
maybe you're in the car, driving into the office, or
picking up some coffee, anything like that. When you get
a chance, head on over to the website Tanton Investment
(13:59):
House dot com. Podcasts they get post right up there
on the website Allsmarre. Information about Tracy and tant On
Investment House all on the website. You can also schedule
appointment right online telephone number six oh eight five zero one,
fifteen forty nine. That's six so eight five zero one
fifteen fortnite. Talking about investing beyond a four to oh
one K. And we've been talking about brokerage accounts Tracy,
(14:20):
and we've left that last seme. We're kind of touching
on some of the some of the tax implications and
some of the benefits, and let's talk about some other
tax efficient strategies when it comes to a brokerage account.
Speaker 3 (14:31):
Well, again, I would just accentuate that you can do
exchange traded funds whether they're active or passive, and they
can be quite tax efficient. And this is partly because
index ETFs they typically have low turnover, meaning they don't
frequently buy and sell investments. And the you know, the
passive ones. No one's particularly saying well, I'm going to
(14:52):
sell this and buy this active ones there is, but
there's still tax efficiency, so they they work it out right,
they don't create that that taxable gain. So I would
encourage people to use ETFs, and I like them both.
I like active and I like passivement. Right now, the
way that growth tex are still I think more expensive
(15:14):
than the value you know, just I think active makes
makes sense.
Speaker 2 (15:19):
And then I would just.
Speaker 3 (15:20):
Say that let's say you have, you know, a high
yield bond fund that creates a lot of income, or
let's say you have even some balanced accounts that you
want to invest in, Well, put those maybe in an
I ray because that way they're not creating an income
and having it taxable along the way in the brokerage account.
(15:43):
So put more of your growthier type of investments in
the brokerage account.
Speaker 2 (15:47):
Now, you can't go too crazy.
Speaker 3 (15:49):
Because if it's an intermediate goal, you don't want all
growth in your brokerage account. Otherwise than you won't have
enough dollars. Right, and say growth falls, you know you
want to bal you still want to balance portfolio, but
in general I tend to put more growth style. If
I'm doing a combination of growth and value. For example,
I'm doing more into the brokerage account because it creates
(16:13):
less dividends or very little dividends, And so that's.
Speaker 2 (16:16):
A good strategy too.
Speaker 3 (16:17):
So you know, you can you can pick and choose
what kind of investment you put in, which kind of vehicle.
Speaker 1 (16:24):
Fantastic insight and tracy one of the things too. I
think a lot of folks wonder, then some of the
other differences a brokerage account compared to a four to
one K, What are some of the other areas there
that people need to be aware of?
Speaker 3 (16:35):
Well, with a four to one case, sean, you know,
contributions come directly from your paycheck and you select how
much you want to contribute and where to invest when
you enroll, Whereas a brokerage account, on the other hand,
gives you full control over your investments with you know,
access to thousands of options. So that's really kind of handy.
Where's the four to one K is kind of limited?
I'm going to only have these options where it's a
(16:57):
brokerage account. You know, the world's your oyster kind of
a thing. You know, whatever's in the marketplace you can
invest in. You know, but this is also kind of
can be ominous maybe for some people because it's like, well,
where do I start, what do I invest in? How
do I do that?
Speaker 2 (17:12):
Right?
Speaker 3 (17:13):
So, you know, you are responsible for managing your own account,
including you know, placing the trades often or investing and
making sure the cash gets invested. But if you have
an advisor, you know, maybe make us a shameless plug.
You know, it's it's an easy thing to do because
they know how to they've talked with you, they know
what the goal is, they know what kind of acid allocation,
(17:35):
and they're familiar with what are the best exchange traded
funds to invest in. So you know, that's another option.
But it's also not rocket science, so it can be done.
You can go to some of the bigger mutual fund
companies and say, okay, what are your options, and I
want to steer closer to value. For example, value stocks
(17:56):
is a great option. Value ETF so and I think
you know what's so nice about it is everything can
be automated today. You know your contributions if you want
to do it monthly into a brokerage account again, once
you've done your wroth, if you're qualify for a wroth,
once you've done your matching for your falling k all
this can be automated and then and also automate your
(18:18):
brokerage account.
Speaker 2 (18:19):
So I also think Sean.
Speaker 3 (18:21):
You know they can be really Brokerage accounts can be
super helpful for estate planning because funds can remain invested
for your entire life and they're not subject to requirementum distributions.
And when you pass away that brokerage account, it rises
the cost basis rises to your date of death value,
so your beneficiaries do not have to pay any taxes
on the gain. And that's huge, and it's just huge
(18:44):
for people for estate planning purposes. I mean, I've seen
very large brokerage accounts and it's like, oh wow, thanks
mom and dad.
Speaker 2 (18:52):
You know, no taxes on that. It's pretty date.
Speaker 3 (18:56):
And it's also nice, you know, like, let's say you
have already put money in emergency cash and you're still thinking, well,
I have extra money, where should I put it?
Speaker 2 (19:05):
Brokerage account? Easy, easy solution. You've already contributed to your
four one K. I would also say, Sean, I see
people where.
Speaker 3 (19:14):
It's like I've got to do the max to four
one K. It's like their knee jerk reaction, and that
might not always be best. I mean, doing the match
always makes sense. Maximizing the roth is makes sense to me.
But then also it's like, okay, where are you tax wise?
And a lot of people they're not in a lower
tax bracket when they retire. They really aren't, and they
(19:35):
don't know what concept because they never did a financial
plan to see where am I going to be? What
are my sources of income that are coming in and
what you know, how much I've put I've been a
diligence saver. I've done fantastic in my four one K.
But guess what what's my required minimum distribution now or
what's even a five percent distribution rate? How much is
that going to be? Because I want to live my
(19:56):
best life in retirement, Well, I'm not in a lower
tax bracket, so then maybe the brokerage account was the
better solution, I would advocate, Yeah, so you know, don't
always just to do knee jerk. I'm going to max
my four one K really look at your numbers and
long term where you're going to be at.
Speaker 1 (20:12):
That's great perspective to Tracy, something I think a lot
of folks may not have talked about. We've got about
just a little over a minute, and I do there.
I know that there's another alternative account that folks should
be considering when it comes to building wealth outside of
a four one K, isn't there?
Speaker 3 (20:27):
Yeah?
Speaker 2 (20:27):
So, health savings accounts.
Speaker 3 (20:29):
They're well known for helping cover healthcare costs with pre
tax dollars, but they also serve a powerful tool for
retirement planning. So you can take advantage of a health
savings account by enrolling. You have to enroll in a
qualifying health plan, which is basically a high deductible plan,
and then you can contribute to an HSA, and the
hsays again they have a triple tax benefit, so you
(20:52):
can do pre tax dollars, so, in other words, you
get a deduction by contributing to an HSA, and then
the earnings grow tax The withdrawals for qualified medical expenses
are tax free, whether you use it now or in retirement.
And then after age sixty five, let's say you need
money and it's not for medical expenses, Well, you can
(21:14):
get the money out of there from the traditional IRA,
you know, you can get money out of there, but
the withdrawals for non medical expenses before age sixty five
you'd have a penalty of twenty percent and ordinary income taxes.
So the if you take it after sixty five, you
just you're subject to ordinary income tax if it's for
non medical expenses, but no penalty. So that's something to consider.
(21:38):
But hsas are wonderful, and you know, people are lots
of people are taking advantage of the health savings account
and the amount that you can do if yourself coverage
only is forty three hundred and family coverage is eighty
eighty five fifty, so eighty five hundred and fifty, and
so if you're over age fifty five, I think it's
(21:58):
five three hundred if single and nine thousand, five point
fifty for family coverage. So that can can add up
over time and you can use it along the way,
but you can also use it in retirement. So it's
a really nice advantage that health savings accounts.
Speaker 1 (22:12):
Something folks may not have thought about. And it says
we talk with certified financial planner Tracy Anton each every
week right here. On thirteen ten, Wui b A A
lot of great information. You can learn more online the
website Tanton investment House dot com. That's t A N
t o N investment House dot com. Telephon number six
oh eight five zero one fifteen forty nine. Tracy, it's
(22:32):
always great chatting you. Enjoy this beautiful day and we'll
do it all again real soon.
Speaker 2 (22:35):
Thanks Sean.
Speaker 1 (22:36):
Take care news comes your way next year. On thirteen ten,
wuib a
This is straight talk from the House with certified financial
Planner Tracy and Toon right here on thirteen ten WI
b A. You can learn more about Tracy and the
team all online Tantoninvestment House dot com. That's t A
N t O N Investment House dot com. Great website
and resource as mentioned, and learn more about Tracy in
the team. You can also learn about some really great
(00:25):
stuff when it comes to podcasts, and they've got some
great videos up there on other media as well that
I'll available to you at Tanton Investment House dot comtel
for number six oh eight five zero one fifteen forty nine.
That's six oh eight five zero one, fifteen forty nine.
And joining us this morning is certified financial Planner Tracy
and Toon. Tracy, how you doing this week?
Speaker 2 (00:44):
I'm doing great? John, how about you?
Speaker 1 (00:46):
I'm doing good. It's great to talk with you, and
UH got to kind of go over some of our
outline for today. It's going to be an exciting show.
What are we going to be talking about this week?
Speaker 3 (00:55):
Well, we're going to talk about brokerage accounts and how
investing the ONTO four one K can be a really
great idea. I came across this Fidelity article that was
entireed that the title was investing beyond a four one
K and I love this concept because I feel like
brokerage accounts are underutilized and a lot of people still
don't understand or know that they can open a brokerage
(01:18):
account and the advantages of the brokerage account. So I'm
excited to just share how it can be a really
good thing, not just for you know, today's expenses or
short term expenses or goals that you have, but long term,
how it can really play a good role or a
helpful role in tax planning for retirement.
Speaker 1 (01:37):
Well, it's talked then about some of those benefits, Tracy.
Obviously there's good reason to be talking about this week,
isn't there.
Speaker 3 (01:43):
Yeah, it's just really like I said, I mean, the
brokerage account, it's a really versatile tool. It can help
really with short term, intermediate term, and long term financial goals.
And you can you can pretty much use any kind
of vehicle or instrument. You can use stocks in a
brokerage account. You can use bonds, mutual funds, exchange traded funds, CDs,
(02:05):
even money market funds. So there's a wide range of
investment options. You can use a lot of people you
know steer toward exchange traded funds, which makes sense because
of the tax ramifications of dividends and interest that would
be taxable to you. So you want a low turnover
fund or an exchange traded fund, that's probably the best
(02:27):
to invest in a brokerage account. But we can talk
more about that. But it's just a flexibility sean that
brokerage accounts have, and again a variety of purchases. Let's
say you're you're saving for a car, or you're saving
for you know, your first house, or even an upgrade
in your house. You've got your emergency funds already in
your bank account, and you're thinking, you know, I could
(02:49):
put more money for short term goals, and I don't
want to put it for retirement per se, or I
might not want to use it for retirement. Well, the
brokerage account would be a great place to put it
because then it's like, oh, I can use it for
the I can use it for retirement if I want
to say, I don't need it for a short intermediate
term goal. So it's just a really nice option, really flexible.
(03:12):
You can determine how you want to title the account.
So let's say you're a single person and you're thinking, okay,
well I want to make sure I avoid probate while
you're going to do a transfer on death. Make it
a TOD account super easy to do. It's like you're
putting the beneficiary on there. Brokerage accounts don't typically have
(03:33):
beneficiary designation, so you would want to delineate that by
putting it as a TOD. A transfer on death super
easy to do. You can make it a joint account.
Say you have a spouse or another family member, or
even a business partner. You could make it a joint account,
joint with rights of survivorship where you could say, okay,
I either one of you can act on the account
(03:54):
anytime you want to and and once if one passes,
it just automatic goes to your other to the other
joint owner. So you know, that's usually how I see
those set up, either as a TOD or a joint
And another thing is is sean If you've say you've
maxed out your retirement accounts, you know our brokerage account
(04:14):
can be a great way to continue saving. If you
have extra dollars and you've already done your emergency cash
and you're thinking, you know, I want to get market rates.
Speaker 2 (04:22):
How do I do that?
Speaker 3 (04:23):
Well, a brokerage account it's a great way to do that,
and a lot of people take advantage of yearly they
manage this account in a way, and that's what advisors
do as well. You know, say there's a possitively there's
loss losses in there, Well they harvest those losses on
an annual basis and take that against gains in the account.
So it's another you know, great way to manage your
(04:46):
tax liability inside the brokerage account, and also just optimizing
for asset allocation. I mean a lot of times people
will be adding you know, monthly to this kind of
account or quarterly, semi annual, or just even annually, and
then it's like, okay, well, I'm want to be more
conservative or I want to be more aggressive. You can
be more aggressive in the brokerage account, which typically is
(05:07):
a good idea because growth funds pay out less in
dividends or very little individends, and so that's a great
way to put your growth type of investment style or
those particular funds into the brokerage account and then be
maybe more conservative with the iras. That's what we tend
to do at the investment house.
Speaker 1 (05:25):
Sounds like an amazing tool. As we talked this morning
with certified financial planner Tracyanton right here in thirteen ten
wuiv A. Of course, Tracy mentioned the investment house. You
can learn more about t Anton Investment House all online
the website tantoninvestment House dot com. That's t A N
t O N investment House dot com. Get a great
website resource to get to know tracing the team. You
(05:47):
can also schedule an aployment right online at Tanton investment
House dot com. Telp number six SO eight five zero one,
fifteen forty nine. That's six SOH eight five zero one,
fifteen forty nine. Talking this week about investing beyond A
four and Tracy, as we talk about brokerage accounts, there's
as you were just talking, there's some really great uses
for it. Are there some unknown features or lesser known
(06:08):
features with a brokerage account.
Speaker 3 (06:11):
Well, one beauty of the brokerage account is really that
allows you to contribute any amount you want, since there's
really no minimums or maximums, and you could withdraw the
money anytime you want, you know, as long as there's
cash in the account. So if you have an advisor,
they're going to most likely invest all of it or
at least most of it, and so you'd want to
(06:33):
call them and say, I'm you know, I need I
want to take out X amount and then they would
make a trade and then have the funds available within
like say a day or immediately, and then it would
be sent ah to your bank account. So if you
have a debit card, you're gonna that's also available. For
brokerage accounts, you're going to want to call your advisor
and say this is this is the amount I want
(06:54):
to use and have that in the cash position in
the brokerage account. But again, super easy to to use
because you could no minimums, no maximums, you know, can
take the money anytime. Really flexible, right, very very liquid.
The only thing you worry about is is if you
invest money, Okay, well, you know it is for longer
(07:16):
term in the sense because markets can correct any time,
and we would correct ten percent a year, so you know,
don't put it in there and think, well, in six months,
I'm going to exactly get this or higher, because you
don't know there is market risk if you're investing in
the stocks, So you just have to be aware that, Okay,
do I have a five to seven year time horizon
to invest in this? Yes, I mean I think markets
(07:37):
will do well this way year, but you know, no
one knows for sure. So that's why you want to
have a little bit of longer time horizon just in case.
Speaker 2 (07:45):
Right.
Speaker 3 (07:46):
But another thing Sean I guess is the tax diversification.
So brokerage accounts are taxable, you know, so using it
alongside of four one K or other retirement plans that
can help with more flexible tax strategy. And this can
be especially useful for early retirees who need access to
their savings before each fifty nine and a half when
(08:09):
you would have penalty free withdrawals from traditional you know,
retirement accounts. So like, if you're going to retire and
you're like, okay, I'm going to retire at fifty five, okay,
and you have every dollar that you've saved in a
four to one K or an IRA, well you have
you have a tax issue, right, so you know that's why,
Well I shouldn't say you one hundred percent to have
(08:30):
a tax issue.
Speaker 2 (08:31):
Let's say you're fifty.
Speaker 3 (08:32):
Anyone retire at fifty five, there is a caveat where
with a four to one K you could take out money.
But beyond that, you know, the brokerage account just allows
for some flexible planning.
Speaker 2 (08:43):
And I just love that.
Speaker 3 (08:44):
And when we talk about you know, we get in
the weeds here Sean with Okay.
Speaker 2 (08:49):
You know I need health health insurance.
Speaker 3 (08:52):
Okay, Well, if I put if I take out money,
I might be going over the Obamacare limits tax wise,
But if I have a brokerage account, that's a very
minimal tax. You know, you're only being taxed on the
gain on that account and the dividends and interest so
and you're getting it most likely if you held it
for a year at tex at capital gains rates. So
(09:15):
you know what's cool about that is is a lot
of people put pull money from the brokerage account to
live off of and then they get Obamacare a very
you know, inexpensive healthcare. Because one of the caveats to
retiring early is, oh I can't do that because I
need health insurance.
Speaker 2 (09:31):
Well, guess what if you have a.
Speaker 3 (09:32):
Brokerage account, it's a really easy gig because you can
show very little on your taxes and get a pretty
sweet deal.
Speaker 2 (09:40):
Through Obamacare.
Speaker 1 (09:41):
Sounds great, And we're going to talk a little bit
more about the tax structure and kind of some of
the differences when it comes to a four to one K.
Get to get to that with Tracy in just a moment.
In the meantime, if you haven't been over to the website,
you've definitely got a head in there today. Tanton investment
House dot com. That's t A N T O N
investment House dot com. Again, that's where you can learn
more about Tracy and the team. You can listen back
to this in previous shows podcasts, also some other fantastic
(10:04):
information all available to you online. Tanton investment House dot com.
That's t A N T O N investment House dot com.
Delphy number six oh eight five zero one, fifteen forty nine.
That's six oh eight five zero one fifteen four nine.
Talking this week about investing beyond a four oh one
K and speaking of brokerage accounts and kind of comparing them,
(10:24):
what is kind of that tax structure? Then, I know
he touched on it a bit there. Tax structure compared
to a four oh one K with these brokerage accounts, Tracy, Yeah.
Speaker 3 (10:32):
So unlike four oh one ks. Brokerage accounts are considered
tax bolt, which means you owe tax only on the
gain when you sell the investment for profit, since the
money you used to fund the brokerage account was after
tax money. So if you sell an investment you've held
for less than a year, any gains or tax at
the regular income tax rate, but if you held it
(10:54):
for over a year you get a lower tax rate.
So the long term capital gains tax is zero fifteen percent,
or twenty percent if you have high income. So depending
on your income you know, most of people I see,
it's like zero or fifteen. So while short term gains
are taxed as you know regular income based on your
federal tax bracket, you know, the long term gains aren't.
(11:15):
So unlike an IRA or four one K where you
take out money, it's one hundred percent of those dollars
are taxable. Here, only the gain is tax and it's
taxed at capital gains rich again, which are lower than
ordinary income tax versus a four one K is one
hundred percent taxable ordinary income. Now, the only thing that
you don't get in the brokerage account is you don't
(11:37):
get the deferral like you do have to pay taxes
along the way. Right on any dividends the mutual fund
would pay out any interest or any like money that
Let's say it's a mutual fund and the portfolio manager
sells that, well, that's going to create a capital gain
for you. So that's why you want exchange traded funds
(11:59):
low turnover. Know, no one's managing it per se, and
so it doesn't create a taxable event for you along
the way. So that's that's the caveat there. But let's
say you sell it, well, you got to pay some taxes,
so the deferral isn't there. But again, I love them,
I love the I love the brokerage account. It's just
such a great thing. Along with a four oh one
(12:20):
K and a roth iray. You know, I think I'm
always partial to those as well. So just it's such
a great, great idea. And again you can do some
tax loss harvesting along the way, you can offset some gains.
And when you again invest in mutual funds exchange traded funds,
you know, those are great ways of trying to mitigate
(12:40):
any taxes along the way as you ope, as you
own this brokerage account. So again it's just really flexible
gives you so much more flexibility now and for your
intermediate goals and for retirement.
Speaker 1 (12:54):
It's really cool to hear and you talk about some
of the different different areas there and different opportunities, and
you mentioned in there as well that this is this
is one of it's not the only tool, but one
of the tools out there, and it's a great thing.
As we talk with Tracy, if some of the stuff
is maybe perking your ears of a vin, you're going
that is interesting. Tracy would love to talk. Then you
can learn more about Tracy and the whole team online
(13:16):
the website Tanton Investment House dot com. That's t A
N t O N investment House dot com. Speaking of
making contacting and schedule appointment to right online at the
website or pickup phone call the office six O eight
five zero one fifteen forty nine. That's six SOH eight
five zero one fifteen four nine. We're going to conegue
our conversation with certified financial planner Tracy Anton. We will
do that next as Straight Talk from the House continues
(13:38):
right here on thirteen ten double U I B A.
This is straight Talk from the House with certified Financial
Planner Tracy Anton here on thirteen ten do wui b
A Wellpe you've had a chance to stop buy the
website Tanton investment House dot com. If you haven't yet,
maybe you're in the car, driving into the office, or
picking up some coffee, anything like that. When you get
a chance, head on over to the website Tanton Investment
(13:59):
House dot com. Podcasts they get post right up there
on the website Allsmarre. Information about Tracy and tant On
Investment House all on the website. You can also schedule
appointment right online telephone number six oh eight five zero one,
fifteen forty nine. That's six so eight five zero one
fifteen fortnite. Talking about investing beyond a four to oh
one K. And we've been talking about brokerage accounts Tracy,
(14:20):
and we've left that last seme. We're kind of touching
on some of the some of the tax implications and
some of the benefits, and let's talk about some other
tax efficient strategies when it comes to a brokerage account.
Speaker 3 (14:31):
Well, again, I would just accentuate that you can do
exchange traded funds whether they're active or passive, and they
can be quite tax efficient. And this is partly because
index ETFs they typically have low turnover, meaning they don't
frequently buy and sell investments. And the you know, the
passive ones. No one's particularly saying well, I'm going to
(14:52):
sell this and buy this active ones there is, but
there's still tax efficiency, so they they work it out right,
they don't create that that taxable gain. So I would
encourage people to use ETFs, and I like them both.
I like active and I like passivement. Right now, the
way that growth tex are still I think more expensive
(15:14):
than the value you know, just I think active makes
makes sense.
Speaker 2 (15:19):
And then I would just.
Speaker 3 (15:20):
Say that let's say you have, you know, a high
yield bond fund that creates a lot of income, or
let's say you have even some balanced accounts that you
want to invest in, Well, put those maybe in an
I ray because that way they're not creating an income
and having it taxable along the way in the brokerage account.
(15:43):
So put more of your growthier type of investments in
the brokerage account.
Speaker 2 (15:47):
Now, you can't go too crazy.
Speaker 3 (15:49):
Because if it's an intermediate goal, you don't want all
growth in your brokerage account. Otherwise than you won't have
enough dollars. Right, and say growth falls, you know you
want to bal you still want to balance portfolio, but
in general I tend to put more growth style. If
I'm doing a combination of growth and value. For example,
I'm doing more into the brokerage account because it creates
(16:13):
less dividends or very little dividends, And so that's.
Speaker 2 (16:16):
A good strategy too.
Speaker 3 (16:17):
So you know, you can you can pick and choose
what kind of investment you put in, which kind of vehicle.
Speaker 1 (16:24):
Fantastic insight and tracy one of the things too. I
think a lot of folks wonder, then some of the
other differences a brokerage account compared to a four to
one K, What are some of the other areas there
that people need to be aware of?
Speaker 3 (16:35):
Well, with a four to one case, sean, you know,
contributions come directly from your paycheck and you select how
much you want to contribute and where to invest when
you enroll, Whereas a brokerage account, on the other hand,
gives you full control over your investments with you know,
access to thousands of options. So that's really kind of handy.
Where's the four to one K is kind of limited?
I'm going to only have these options where it's a
(16:57):
brokerage account. You know, the world's your oyster kind of
a thing. You know, whatever's in the marketplace you can
invest in. You know, but this is also kind of
can be ominous maybe for some people because it's like, well,
where do I start, what do I invest in? How
do I do that?
Speaker 2 (17:12):
Right?
Speaker 3 (17:13):
So, you know, you are responsible for managing your own account,
including you know, placing the trades often or investing and
making sure the cash gets invested. But if you have
an advisor, you know, maybe make us a shameless plug.
You know, it's it's an easy thing to do because
they know how to they've talked with you, they know
what the goal is, they know what kind of acid allocation,
(17:35):
and they're familiar with what are the best exchange traded
funds to invest in. So you know, that's another option.
But it's also not rocket science, so it can be done.
You can go to some of the bigger mutual fund
companies and say, okay, what are your options, and I
want to steer closer to value. For example, value stocks
(17:56):
is a great option. Value ETF so and I think
you know what's so nice about it is everything can
be automated today. You know your contributions if you want
to do it monthly into a brokerage account again, once
you've done your wroth, if you're qualify for a wroth,
once you've done your matching for your falling k all
this can be automated and then and also automate your
(18:18):
brokerage account.
Speaker 2 (18:19):
So I also think Sean.
Speaker 3 (18:21):
You know they can be really Brokerage accounts can be
super helpful for estate planning because funds can remain invested
for your entire life and they're not subject to requirementum distributions.
And when you pass away that brokerage account, it rises
the cost basis rises to your date of death value,
so your beneficiaries do not have to pay any taxes
on the gain. And that's huge, and it's just huge
(18:44):
for people for estate planning purposes. I mean, I've seen
very large brokerage accounts and it's like, oh wow, thanks
mom and dad.
Speaker 2 (18:52):
You know, no taxes on that. It's pretty date.
Speaker 3 (18:56):
And it's also nice, you know, like, let's say you
have already put money in emergency cash and you're still thinking, well,
I have extra money, where should I put it?
Speaker 2 (19:05):
Brokerage account? Easy, easy solution. You've already contributed to your
four one K. I would also say, Sean, I see
people where.
Speaker 3 (19:14):
It's like I've got to do the max to four
one K. It's like their knee jerk reaction, and that
might not always be best. I mean, doing the match
always makes sense. Maximizing the roth is makes sense to me.
But then also it's like, okay, where are you tax wise?
And a lot of people they're not in a lower
tax bracket when they retire. They really aren't, and they
(19:35):
don't know what concept because they never did a financial
plan to see where am I going to be? What
are my sources of income that are coming in and
what you know, how much I've put I've been a
diligence saver. I've done fantastic in my four one K.
But guess what what's my required minimum distribution now or
what's even a five percent distribution rate? How much is
that going to be? Because I want to live my
(19:56):
best life in retirement, Well, I'm not in a lower
tax bracket, so then maybe the brokerage account was the
better solution, I would advocate, Yeah, so you know, don't
always just to do knee jerk. I'm going to max
my four one K really look at your numbers and
long term where you're going to be at.
Speaker 1 (20:12):
That's great perspective to Tracy, something I think a lot
of folks may not have talked about. We've got about
just a little over a minute, and I do there.
I know that there's another alternative account that folks should
be considering when it comes to building wealth outside of
a four one K, isn't there?
Speaker 3 (20:27):
Yeah?
Speaker 2 (20:27):
So, health savings accounts.
Speaker 3 (20:29):
They're well known for helping cover healthcare costs with pre
tax dollars, but they also serve a powerful tool for
retirement planning. So you can take advantage of a health
savings account by enrolling. You have to enroll in a
qualifying health plan, which is basically a high deductible plan,
and then you can contribute to an HSA, and the
hsays again they have a triple tax benefit, so you
(20:52):
can do pre tax dollars, so, in other words, you
get a deduction by contributing to an HSA, and then
the earnings grow tax The withdrawals for qualified medical expenses
are tax free, whether you use it now or in retirement.
And then after age sixty five, let's say you need
money and it's not for medical expenses, Well, you can
(21:14):
get the money out of there from the traditional IRA,
you know, you can get money out of there, but
the withdrawals for non medical expenses before age sixty five
you'd have a penalty of twenty percent and ordinary income taxes.
So the if you take it after sixty five, you
just you're subject to ordinary income tax if it's for
non medical expenses, but no penalty. So that's something to consider.
(21:38):
But hsas are wonderful, and you know, people are lots
of people are taking advantage of the health savings account
and the amount that you can do if yourself coverage
only is forty three hundred and family coverage is eighty
eighty five fifty, so eighty five hundred and fifty, and
so if you're over age fifty five, I think it's
(21:58):
five three hundred if single and nine thousand, five point
fifty for family coverage. So that can can add up
over time and you can use it along the way,
but you can also use it in retirement. So it's
a really nice advantage that health savings accounts.
Speaker 1 (22:12):
Something folks may not have thought about. And it says
we talk with certified financial planner Tracy Anton each every
week right here. On thirteen ten, Wui b A A
lot of great information. You can learn more online the
website Tanton investment House dot com. That's t A N
t o N investment House dot com. Telephon number six
oh eight five zero one fifteen forty nine. Tracy, it's
(22:32):
always great chatting you. Enjoy this beautiful day and we'll
do it all again real soon.
Speaker 2 (22:35):
Thanks Sean.
Speaker 1 (22:36):
Take care news comes your way next year. On thirteen ten,
wuib a
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