Tax Deferred Portfolio Benefits
Long-Term investors have known the impact tax deferral can have on a portfolio. Taking advantage of the full range of tax-deferred investment options can be critical and yet a basic strategy with the most impact.
When income happens in an annuity, IRA, or other tax deferred account, the investor can wait to pay taxes or income later, when they are in a potentially lower tax level such as retirement.
Bonds and Asset Classes that generate income or a high level of short term gain can provide additional advantages in a tax-deferred account. For someone in the 25-35% federal tax bracket with state taxes, this is worth reviewing as a portfolio strategy.
You can still build a core portfolio in a tax-deferred platform.
Portfolio Rebalancing, Investment Turnover, with Dividend and capital gain distributions all can be tax deferred. Tax Deferred investing can also provide advantages to asset classes that generate a high level of short-term capital gains.
While tax deferred funds are accessible at any time, a disadvantage is that any withdrawal before age 59 ½ has a 10% tax penalty.
Creditor Protection variety from state to state. In Louisiana Rev. Stat. Ann. 22:647 titled “Exemption of proceeds; life, endowment, annuity” does provide a level of protection from creditors that investors should consult with an attorney and be familiar with.
About the Author: Charles Marsala is a Financial Advisor with Benchmark Investment Group with Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at Charles.Marsala@lpl.com