Slash Taxes and Fees on Your Retirement Portfolio

When you are developing your retirement portfolio, you want to pay special attention to anything that could cut into the amount of money that you have available. Both taxes and fees are going to play a role in how much money you have available to you upon retirement. Here are a few things to consider about slashing taxes and fees on your retirement portfolio.

Fees

When you get involved in the investment world, you are quickly going to become familiar with the fees that are charged in different areas. If you invest in stocks, you are going to have to pay a stockbroker a commission every time that you make a purchase. You are also going to have to pay a certain amount of money for management expenses if you invest in mutual funds. If you have a retirement account, such as an IRA, you are also going to have to pay some type of fee to the company that holds your account. By the time you add up all of these fees, you are going to find yourself spending quite a bit of your retirement money. Over the years, this can have a big impact on the amount of money that you have available to you when you retire.

Taxes

In addition to fees, you need to pay special attention to the amount of taxes that you have to pay on your investments. If you invest in stocks or any other type of security, you are going to have to pay taxes on the amount of money that you make from them. With long-term investments, you will have to pay capital gains taxes. You are going to have to treat dividends as regular income and pay income taxes on them. This makes it important for you to consider the impact of taxes and choose the right type of retirement account that can minimize the impact of these taxes.

ETFs

When you are choosing securities, you might want to consider investing in ETFs. ETFs can give you the same diversification as mutual funds; however, you will be able to spend less money for them. An ETF typically has a smaller expense ratio than a mutual fund that is very similar. This will allow you to minimize your fees for your retirement investments, and you can still invest in many different things.

Roth IRA

In order to minimize taxes, you should consider investing in a Roth IRA. The Roth IRA is designed to give you an advantage when it comes to paying for your taxes upon retirement. You are going to fund this type of account with after-tax dollars. Then the money will be allowed to grow in your account tax-free. When you get to retirement, you are allowed to withdraw the money without paying a dime in income taxes on it. This means that you will be able to benefit from the growth of your investments without ever having to pay taxes on it.

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