Advice for the Working Stiff

A brief overview of the entire lecture series is on this page. We start this slide deck on advice for the typical US wage earner with descriptions of types of securities and move to retirement and similar “Grow Tax-Free” accounts, Corporate stock incentives and recommendations on choices between those when allocating savings. The entire slide deck is available through this download link.

What follows is an elaboration on one essential slide in this deck looking at investment accounts which can allow for investments to grow tax-free (GTF). What differentiates these accounts is whether the investment is before or after tax and whether interest income and/or principal, or neither, are taxed at withdrawal. A brief explanation follows after the screenshot of the slide that follows.

The red strips going across include health savings accounts, traditional IRA/401-k, ROTH/education/loan payment, taxable accounts and finally bank accounts, which, as noted, are taxed yearly unlike the others (unless the bank investments such as CDs are in IRA accounts). Note that loan pre-payments are like a ROTH in that the ‘investment’ (the additional payments to the principal of a loan) is post-tax and the ‘gain’ later through this pre-payment is not taxed.

For those with higher tax rates (usually in the prime of their career), the first bulleted point in the slide notes that the ordering of income from these accounts, should they yield the same interest rate, are ordered from the highest on top to the lowest at the bottom. For younger workers, with likely lower tax rates, the strip at the bottom of the slide, going from darker greens to lighter greens, depicts a drop off of earnings from highest to lowest across the investment accounts.

Consult us for a further drill down, than that provided in our slide deck, on aspects of investing of further interest. You can reach us at advice@resourcetepee.com or at 551-233-6768 for personalized advice or a group course offering. Details on our fee schedule are in the FAQ page.