REVEAL Q3 2017 - Page 34

SAVING SMART By Abigail Soren Abigail Soren is a Certified Financial Planner™ and Senior Financial Planner at BT Wealth Management, LLC. She assists clients in managing and balancing their investments and financial goals. In her spare time, Abigail volunteers for the Atlanta Humane Society and enjoys taking her Pomeranian, Jack, on long walks around the city. You’ll often find them on a Starbucks patio enjoying a good book. I recently sat down with some girlfriends for dinner. As we sipped our margaritas, conversation of adulting and saving came up. A friend sheepishly said, “I don’t know where to start saving, so I don’t.” As a financial planner, my job is to organize people’s financial lives and create a plan to help them meet their life goals. I’ve actually heard this reasoning quite often. But, what if we change that mindset? What if we lean into the confusion revolving around personal finances and let education empower us to be in control of our own financial futures? After all, we’re strong, independent women! Let’s focus on the different types of accounts in which you can invest your hard-earned cash. They are generally defined by how they are taxed. You can still put the same stocks and bonds into each of them: The difference is how those investments are treated while they are in the account and when you take them out. Below is a guide to get you started! Potentially helps you later Distributions aren’t taxed in retirement! Contributing to your 401(k) lowers your current tax liability. Potentially helps you now Potentially helps you now & later Use “after-tax” dollars (after you get your paycheck) to fund. Use “pre-tax” dollars (before you get your paycheck) to fund. Use “after-tax” dollars (after you get your paycheck) to fund. Funds in the account grow tax-free! Funds in the account grow tax-free! Funds in the account do not grow tax-free Annual Max Contribution Roth 401(k): $18k Roth IRA: $5.5k Annual Max Contribution Trad. 401(k): $18k Trad. IRA: $5.5k Funds are taxed when withdrawn to fund retirement. TAX-FREE Roth 401(k)s & Roth IRAs TAX-DEFERRED* Traditional 401(k)s & Traditional IRAs *Deferred: Taxes are delayed until later time. REVEAL | Q3 2017 34 You can use these funds without penalty now or in retirement. Dividends and interest produced in the account are taxed in the year they are received. When you sell investments, you get taxed also. No annual contribution limit! TAXABLE “Brokerage” or “Individual” Accounts