Strategic Financial Planning in San Diego

Jason Groth offers strategic financial planning in San Diego.

Whether we are satisfied with the amount we have saved for our retirement, or want more for security, we must plan ahead to achieve our goals. There are three basic categories for storing and preserving our wealth for future use. No matter your situation, Jason Groth of San Diego will guide you to achieve your financial goals. 

Three Categories of Savings

The first category of savings is tax-deferred. This includes 401(k), IRA, annuity, simple pension pension, and social security. Tax-deferred simply means you will not have to pay taxes until later on when you must withdraw it. The Internal Revenue Service (IRS) allows the amount put into this category to be deducted from gross income for the year. 

The tax-savings with this category can be substantial over a person’s lifetime. When savings or investments are held until retirement, the tax rate for retirees when withdrawing will generally be less because retirees are typically in a lower income tax bracket. 

The second category of savings is taxable. This is taxed at your ordinary income or capital gains rate. This includes bank accounts, money markets, CDs, stocks, bonds, and mutual funds. The advantage with this category of savings is you have more control over your money, and can withdraw funds whenever you wish. Though the tax rate in this category affects the amount you will keep, the much higher potential gains with some investments can more than make up for the tax rate.

The third category of savings is tax-free. This includes Roth IRA, municipal bonds, and certain types of insurance. The advantage of tax-free investments is obvious, as investors can keep all of their gains. Some of these funds provide yields that are comparable or even superior to taxable investments. However, the money put into this category is not tax-deductible. The benefit to this type of investment comes in being able to withdraw your gains tax-free. 

Other Considerations

With the first two categories, you may be surprised by the taxes you will have to pay. The first category not only entails taxes, but also may involve specific rules on distributions. A financial advisor in San Diego will help you to strategize to reduce the amount you will have to pay in taxes with these categories. Having to pay less taxes means you will keep more money for yourself, which translates to having more money to meet your needs and wants. 

With all of these categories of savings, it is important to take into account the level of inflation, as your returns on investment should be greater than the increase in the cost of living. As part of a sound investment strategy, investors often choose to put money into more than one of the above categories. It is also important to keep in mind that though some types of investments may be considered less risky than others, all investments, including municipal bonds, carry a level of risk.

Contact Jason Groth of Safe Harbor Solutions in San Diego to plan for your financial future and reach your personal goals. He is a licensed financial advisor with decades of experience who will carefully review your situation and give you advice that meets your needs.