If there’s one thing in life that’s certain, it is death and taxes. Paying more attention to the latter, taxes can be annoying, nobody enjoys paying them. Today you will learn that there are several opportunities where you can actually earn income without getting taxed mainly through investment.
These investments can be planned and banked by the young and seniors alike. The bright side about tax-free income for seniors, is that you get to put in money that won’t have to undergo more taxing in the long run. Below, are several investment options for you, see what works best for you
The Roth IRA is essentially, a starter account that will slowly reel you into an investment program suitable for senior citizens. In summary, this account allows you to contribute about $5500 to $6500 for those below 50 and for those that are 50 years and above respectively. Unfortunately, your input money will be taxed when you make the deposit, but it gets the opportunity to grow without being taxed. The most important part is that you also get to finally withdraw it tax-free.
This investment plan is doable, but you’ll be required to accumulate up to more than $5500 annually in order to achieve your financial plans. Just like many other investments, you will be limited based on your marital status, as well as your earnings. If you’re single, you can only contribute if you earn $135,000 or less each year. Married couples qualify if they earn a combination of up to $189,000 every year.
The Roth IRA is one of the most recommended investment plans. You can accumulate up to $3.25 million dollars, if you began at the age of 22 and earned 10% interest until the age of 65. This figure could, favorably increase to $5.25 million if, you went on up to the age of 70. This is just the beauty of tax-free compound interest.
Roth 401(k) or Roth 403(b)
A majority of seniors that put their hard earned money into investments usually complain about not reaching their financial goals. This investment plan can be ideal for such people, but only if it suits their goals.
Basically, you can save up to as much as $18,500 per year, as well an extra $6,000 if you’re 50 years of age or older. This is just like the Roth IRA for seniors where you only get to pay taxes on contributions but, the growth and withdrawals are tax-free. The best part about it is that there are no income restrictions for this plan.
Municipal Bonds and Funds
Unlike other investments, this option is very specific in which it offers seniors at the end of the day. This means that your financial plans and goals have to be quite objective, in order to meet the requirements.
The main deal with this plan is that your income distributions may be tax-free to federal income tax, but they may still be under the radar of the state income tax. You may also need to take note of the fact that there’s the potential for default. In short, the income generated from these bonds stands to be tax-free, but the capital gains may still undergo taxation.
You may also need to take note of the fact that there’s the potential for default. In short, the income generated from these bonds stands to be tax-free, but the capital gains may still undergo taxation.
Health Savings Account (HSA)
Essentially, HSA is known as the “master plan” of all senior citizen investment options.
The requirement is that you need to contribute about $3,450 annually, even up to $4,450 annually if you’re 55 or older. Depending on the type of health insurance acquired, you can break free of taxes for the contributions, growth, and withdrawals altogether. All you need to do is to nurture it through its compound growth until you reach retirement.
Afterward, you can repay yourself for all the medical bills that you managed to pick up over time. However, make sure that you have proof of receipt.