Great Passive Income Ideas
  • Investing
  • Real Estate
  • Work From Home
  • Pay Off Debt
No Result
View All Result
  • Investing
  • Real Estate
  • Work From Home
  • Pay Off Debt
No Result
View All Result
Great Passive Income Ideas
No Result
View All Result

How to Use Tax-Sheltering to Build Your Passive Income Fortune

by Josh Watkins
June 26, 2019
Reading Time: 3min read
0
How to Use Tax-Sheltering
Share on FacebookShare on Twitter

How to Use Tax-ShelteringSaving and investing is one of the single best ways to create a fortune that will provide a lifetime of passive income.

But as I’m sure you’ve encountered, saving money is no easy task.  It often takes a lot of careful planning, budgeting, and discipline.  As if living expenses weren’t enough, unplanned expenses like car repairs, health care providers, or things that need fixed around the house always seem to sprout up.

Fortunately there are several ways to optimize your savings in order to get more for every dollar you earn.

To build up your pile of money as quickly as possible, you have to be very strategic about where you put your money.

In this post, we’ll explore a few good options for avoiding taxes and building up your savings as fast as possible.

Table of Contents

  • Tax-Sheltered Retirement Accounts:
  • Annuities:
  • Life Insurance:
  • Conclusions:

Tax-Sheltered Retirement Accounts:

I’m not the only person who wants you to save more money; the government wants you too.  (But before you give them too much credit, know that this is because they don’t want to have to take care of you when you get older.)

To encourage people to save and provide for their own retirements, tax-sheltered retirement accounts like 401(k)’s and IRA’s allow working people to set aside money before the taxes are taken out of their wages.  This allows them to effectively save “more” for every dollar they save.

For example, if you traditionally earn $1, you only get to keep $0.75 of it after you pay 25% to taxes.  So if you want to save that dollar, you really only get 75 cents.  But with a tax-sheltered account, you get to keep the whole dollar!  No taxes are taken out.

What’s better?  That dollar gets invested and grows for years without taxes being taken out every year.  This again allows it to compound even greater than it would in a normal taxable brokerage account.

Taxes are finally taken out at the time of retirement when you decide to withdraw the money for living expenses.

You can read more on the benefits of tax-sheltered savings at this post here.

Annuities:

If you’d rather avoid the markets and lock into a tax-sheltered investment that pays out a defined amount of money every year (in the future), then an annuity might be a better fit for you.

Annuities have been around since the days of the Romans.  Soldiers would take their earnings and pool them together.  As members of the group would die from battle or age, the remaining members would enjoy the distribution of wealth.

Today, annuities are typically offered by life insurance companies.  You can setup a contract now and start paying into it.  In the future, once the contact matures, you will enjoy fixed, guaranteed monthly payments for the rest of your life.

You can learn more about annuities are our post here.

Life Insurance:

Life insurance is a very unique way to mix the benefits of both tax-sheltered retirement savings and annuities all into one.  This is because, depending on which type of contact you enter, you can effectively build your savings tax-free all while receiving the protection of annual life insurance.

There are many different options for companies that offer life insurance. Some of them good and bad. Reviews from ConsumersAdvocate.org can help you sort out the best. It will be very important for you to do your homework before you select one to partner with for investing. For example, as in the case of AARP life insurance program, you’d be working with a reputable company that has been around for more than half a century. But they also have some documented complaints about non-payment of death benefits and poor customer service.

Conclusions:

Sometimes the best way to build your fortune is to simply make every dollar saved worth as much as it possibly can be.  And often that means avoiding taxes and using tools like 401(k)’s, IRA’s, annuities, and life insurance contacts to make that happen.  Though there can be some positives and negatives to each, the overwhelming benefit of delaying tax payment and keeping 33% more of your money will have you well on your way to building your passive income generating fortune!

Featured image courtesy of FreeDigitalPhotos.net

Next Post
I Want To Make Money on the Side – What Are Some Ways To Do So?

I Want To Make Money on the Side - What Are Some Ways To Do So?

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recent News

How to Make Money with Photography Stock Images (Hint: You Don’t Need a Spendy Camera)

How to Make Money with Photography Stock Images (Hint: You Don’t Need a Spendy Camera)

June 13, 2020
Passive Income Opportunities You Can Take Advantage of From Home

Passive Income Opportunities You Can Take Advantage of From Home

June 12, 2020
Using Continuously Compounded Interest to Create Big Passive Income in 2020

Using Continuously Compounded Interest to Create Big Passive Income in 2020

June 10, 2020

Your paycheck isn’t the only way to make money! Check out our extensive list of great passive income ideas to start making cash on the side right away.

Great Passive Income Ideas is for entertainment and reference purposes only. The information presented is the opinion of the author only and should not be interpreted as specific advice or recommendations towards your financial situation. Always consult with a true professional before making any financial decisions.

Affiliate Disclaimer: Great Passive Income Ideas may be compensated for our personal opinions, reviews, and affiliate relationships with some of the featured products and services. Google Adsense, Amazon Associates, and Clickbank are examples of such relationships. Such content, advertising space or posts may not always be identified as paid or sponsored content. All offers or claims are subject to change without notice and should be verified with the manufacturer, provider or party in question.

  • Investing
  • Real Estate
  • Work From Home
  • Pay Off Debt

© Copyright 2020 Great Passive Income Ideas.com · All Rights Reserved

  • About
  • Blog
  • Categories
  • Contact
  • Great Passive Income Ideas – We’ll Show You How to Earn More Money!
  • Hire Me
  • Home
  • Privacy Policy

© Copyright 2020 Great Passive Income Ideas.com · All Rights Reserved

No Result
View All Result
  • Investing
  • Real Estate
  • Work From Home
  • Pay Off Debt