Money Wells of Life Image

Real Estate

Can be purchased with after-tax dollars that appreciate over a long-term horizon. Owner can access funds through second mortgage or home equity loans. In order to realize/access profit, requires a willing buyer and seller to agree upon market price. Seller’s proceeds are subject to capital gains tax or ordinary income tax.  Traditionally, this has been a staple of American wealth and investment over time. However, in a struggling economy, property values decline and sellers/buyers can disappear.

Qualified Retirement Funds 401(k), IRA, SEP (Pension)

Contributions made with pre-tax dollars that grow on a tax-deferred basis. Premature withdrawals (made prior to age 591/2)  — that are not deemed as hardship — may be subject to ordinary income tax, plus a 10% tax penalty. Traditionally, this has been a reliable investment provided you don’t make premature withdrawals (which reduces principal) and market conditions are favorable.

Stock Portfolio

Shares are purchased with after-tax dollars and are typically highly liquid. However, it can be difficult to time market to know when is the optimal time to sell/buy shares. If you sell at a profit, proceeds are subject to capital gains tax. Can generate quick and large profits; but much of the performance can depend on the overall economy and general market behavior.

Bank Savings

One of the safest investments, CDs and FDIC-insured Money Market accounts pay interest on an insured (up to $250,0001) principal that is fully taxable as ordinary income. While this is generally a risk-free way to earn interest on your money, when the economy is struggling, interest rates can drop to very low levels.

Permanent Life Insurance

In addition to death benefit protection, permanent life insurance can provide tax-deferred cash value accumulation which can be accessed at any time through tax-free loans and partial withdrawals2 and a guaranteed income tax-free lump-sum insurance benefit paid to beneficiary3. Often one of the best asset classes in a variety of economic environments.

1 The standard FDIC insurance amount is currently $250,000 per depositor per institution.
2 Loans against your policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest.
3 Provided the policy remains in-force, all premiums are paid when due, and the policy has not been subject to transfer for value. All product guarantees are backed by the claims paying ability of the issuing company.
For informational purposes only. Neither Kevin Odell nor Deloach, Odell & Associates provides tax legal or accounting advice. For advice on such matters, consult your own professional advisors.


Where do you think tax rates are going?

Note: This table contains a number of simplifications and ignores a number of factors, such as a maximum tax on earned income of 50 percent when the top rate was 70 percent and the increase in rates in the recent past due to income-related reductions in the value of itemized deductions. Perhaps most importantly, it ignores the large increase in percentage of returns that were subject to this top rate.
Source: Tax Policy Center, Urban Institute and Brookings Institution, Historical Individual Income Tax Parameters May 12, 2014.
This material includes a discussion of one or more tax-related topics. This tax-related discussion was prepared to assist in the promotion or marketing of the transactions or matters addressed in this material. It is not intended (and cannot be used by any taxpayer) for the purpose of avoiding any IRS penalties that may be imposed upon the taxpayer.
Bates #1603853 (exp. 05/28/2016)
SMRU #508434