Written by Lance Roberts, Clarity Financial
— this post authored by Danny Ratliff
Diversification
How well do you know diversification? Not your typical asset class diversification that every advisor talks about. BUT, beyond the typical industry norm of having Large cap, Mid cap, Small cap, international stocks and bonds as diversification.
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The type that many advisors don’t speak of, but I feel there is a growing army of advisors ready to conquer. These advisors are ready and willing to equip you with more information, better information to help you make the best decisions beyond just diversification of your investments, but to giving your investments freedom.
Freedom! We all like freedom, well most of us do. It’s kind of a funny thing to think about freeing your money; but let me explain. Assets are only worth what they are on paper until they are taxed.
If you could have funds in 3 different accounts: a partially taxable account, a tax free account and a fully taxable account where would you want these funds?
Allow me to put these in order:
- Tax Free
- Partially Taxable
- Fully Taxable
WHAAAA???? You guys ever seen the minions? I’d put a picture here, but you know that little copyright thing. Look it up and you’ll understand, but this is how I imagine many reactions.
CPA’s as well. (Unfortunately, most people judge them on how much they can save us today versus a forward looking or advisory view.)
Understandably so, you’ve been taught, we’ve all been taught that we need to sock away every dollar we can into a pretax account because inevitably we will all be in a lower tax bracket when we retire.
What if we aren’t?
What if the government spends to much money? What if they just want to redistribute? What if we see higher taxes?
What if after your work benefits, retirement contributions and health care premiums you’re in the same tax bracket in retirement as you were in your working years.
How far will your money go?
Scared yet? Yeah, #metoo. Let’s start a movement. #makethesefundsmineagain catchy if I don’t say so myself.
In the new year we’ll be discussing how to keep more money from the dreaded tax collector and more in your pocket. We’ll also discuss what types of accounts fall into the categories of tax free, partially taxable and fully taxable. Today I hope I caught enough of your attention to start at the very least thinking about not only diversification of assets, but of accounts.
You’ll be hearing more about more specific strategies to diversify soon, but don’t hesitate to give me any suggestions or questions.
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