Saving More with Tax-Advantaged Investments


tax_advantage_savingsHave you been saving ahead for your retirement? Or for a higher education? The earlier you start, the more you’ll have in the long run. And no matter where you are in your career or your savings plan, it’s a good idea to consider certain investments that offer special tax benefits – so you can keep as much of your savings as possible.


Why use tax-advantaged investments?

Taxes can take a big cut out of your investment earnings over time. Just how much difference taxes make will depend on your own tax bracket and other variables, like account fees and more. And while there are no guarantees about how much any investment will grow, there are quite a few options to help you pay less in taxes.


Here are some investments you may want to consider:


Traditional IRAs

You can contribute to an IRA (individual retirement account) if you’re under age 70 ½, and either earn income yourself or are married to someone who earns an income. In some cases, you can get a tax deduction for the year in which your contributions were made – but either way, you won’t pay taxes on the money until you withdraw it, years from now.

Roth IRAs

With a Roth IRA, you pay your income taxes as usual, then make contributions with your after-tax dollars. The upside here, is that you won’t pay any further taxes when you make qualified distributions later in life. So all of the investment growth is yours to keep.


Simple IRAs and Simple 401(k)s
Often tied to your job, these accounts let you make contributions based on your income. And in some cases, your employer may match your contribution.


With an annuity, you pay money to an insurance company, which promises to pay principal and earnings back to you or your named beneficiary in the future. This option also typically allows you to receive an income stream for life. You’ll only pay taxes on your earnings once you start receiving distributions.


Specialized Savings for College


529 plans

With a 529, you can save for your children’s education. When it’s time for college, your student can take money out for qualifying expenses, with no federal tax.

Coverdell education savings accounts

These accounts are specially designed for individuals with a lower income level. Withdrawals for qualified education expenses are free of federal taxes.


Series EE bonds

The interest earned on Series EE savings bonds grows tax deferred. And if you meet certain requirements at the time you redeem the bonds for college, you won’t be taxed on the interest earned.


Want to learn more?

Deciding on the best investment options can be complicated. You’ll want to consider tax implications, but other factors like your age and life circumstances, rates of return, potential risk, and more can affect your final decision.

If you want to find out more, and get help deciding which investments are best for you and your family, stop in at your local Horizon Bank to get started. Our financial advisors can offer Sound Advice that is completely objective.

Contact us today at 888-873-2640 if you have questions!