So I maxed out my Traditional IRA ($5500) and HSA ($3600) for the year. I can't do a Roth because I make too much. Where else can I put my long term savings? I'd like to avoid/defer taxes (legally) and be able to put it into mutual funds. Thanks.
Another option may be to pursue investing in a very tax efficient way. Rather than lock the funds up under a variable annuity wrapper consider purchasing mutual funds or ETF's that have tax efficiency as a mandate. That means the manager will seek to avoid taking capital gains unless absolutely necessary. The reason that this may be valuable to you is that while VA's do defer taxes for a time, when the investor takes any distributions the gain is taxed as income rather than capital gains. If, as you state, you are in a higher tax bracket, capital gains taxes are probably less than income taxes. The use of tax loss harvesting would also be beneficial by matching up, as well as possible, gains and losses aiming for a net effect of zero. This takes a little more work but is well worth it. The other added benefit is your money is not locked up with any restrictions. Best of luck!
Steve, Here is an outside the box answer, but depending on your age, whether or not you have children or grandchildren, and whether this is money you will need or not, a 529 plan is an alternative way to defer taxes and potentially take advantage of state income tax deductions. I believe this strategy would make sense if this money could likely be used by some family beneficiary for higher education purposes.
If this money is needed for your retirement a solution such as a variable annuity or a buy and hold equity portfolio may be a better option. Please speak to a trusted advisor in your area so they have a complete understanding of your goals and needs before considering a solution.
Thank you for the question. If you maxed out your Ira, if you do not have a 401k plan the the next best option would be a Variable Annuity. I would suggest fidelity or vanguard. Expense is about .25% per year access to various no load no transaction fee funds. Once you turn 59 1/2 you have full access to the account with no surrender fees or restrictions. No limit on contributions and money will grow tax deferred. Let me know if you have any questions. Michael www.VisionaryWealthMgmt.com
Several good answers already. Another thought might be to look into tax free Municipal bonds or bond funds. If the bonds are issued in your state, they might also be free of state tax as well.
Steve, If your income is stable, you have sufficient liquid assets and you are in good health, you may want to consider using life insurance as an investment. When structured properly, a life insurance policy can provide you tax-free growth and income, in addition to the death benefit. Unlike insurance you purchase for income and lifestyle protection, the goal in this strategy is to purchase the lowest possible death benefit for the amount of money you want to shelter and grow inside the insurance policy each year. The lower the death benefit, the lower the insurance costs, the more effectively your money can grow tax-free.
You can invest in various types of insurance depending on your return objectives and risk tolerance. Whole life provides guaranteed interest, like bonds. Indexed life provides a rate of interest indexed to the stock market, with no risk of principal loss in the stock market. Variable Universal Life provides the most growth potential via mutual funds and the most investment flexibility. However, it also carries the most risk.
While this approach is not for everyone, for the right individual in the right situation, life insurance can be an extremely effective tax-free growth and income investment. However, due to the illiquid nature of life insurance, you must work with a financial advisor who knows how to incorporate life insurance into your overall financial planning and investment portfolio, and who can help you manage the policy and its investments (if any) effectively. Feel free to contact me if you have any questions on this approach.