As we age, we want to ensure that our money is safe and has the opportunity to grow. Although there are many different investment plans for seniors, here are the top tax-free investments that can benefit seniors.
The first tax-free investment plan that we will discuss is a Health Savings Account, or an HSA. This account is a tax-advantaged account for those individuals who are covered under high-deductible health plans into order to save for those health and medical expenses that the high-deductible health plan doesn’t already cover. Both an employer as well as the individual who holds the account can contribute money into the account up to a certain limit each year. Those invested contributions will grow over time and can be used to cover those qualified medical expenses that your health plan doesn’t currently cover. It could cover things like: vision, dental, and over-the-counter drugs. If you are an individual who is facing high deductibles, this is a great plan in order to cut some of those costs. In order to open this type of account you will need to already have an HSA-eligible high-deductible health plan, or HDHP. An example of this type of plan cutting down medical costs would be: under the HDHP, an individual with a $2,000 deductible makes a medical claim of $3,500. Since the insurer is only responsible for the excess or, $1,500, the individual is still expected to pay out-of-pocket $2,000. With a Health Savings Account, it can be used to supplement the funds that the individual would have to pay in order to cover the deductible.
Next up, we will discuss municipal bonds. Through municipal bonds, your money acts as a loan to the local government in order to fund capital expenditures like parks, libraries, roads, bridges, etc. This type of bond is appealing because the interest paid on municipal bonds is ordinarily tax-free, in turn, making it a great resource for those in high tax brackets. Your investment can grow with the generated collected taxes from the project, depending on the type of municipal bond you choose. There are two different types: A general obligation bond, or GO, and a revenue bond. A GO is issued to you by the government and it is not backed by revenue from a given project. However, some GO bonds get funding from property taxes or other general funds. A revenue bond secures both interest and principle payments through things like sales, hotel occupancy, fuel, or other taxes. Revenue bonds are a little more vulnerable due to the fact that they wage on things like consumer tastes and the general economy rather than GO bonds. There are many disparities involving different municipal bonds and although it may seem confusing, it doesn’t have to be. The right financial advisor is at your fingertips. Get in touch with Capital Choice Advisors and get the full scoop on municipal bonds as well as any type of tax-free investment you may inquire about.
Another tax-free investment is to invest through Exchange-Traded Funds, or ETF’s. An ETF involves a collection of securities that tracks an underling index. A security could be something like stocks, bonds, and commodities. ETF are comparable to mutual funds, accept they’re listed under “exchanges” and are traded throughout the day like regular stocks. Moreover, an ETF encompasses putting forth your securities and trading them on exchange, much like you would with a stock. As the ETF is bought and sold the price fluctuates regularly. When going through an ETF, the expense ration is lower and there are less commissions for brokers than when you would buy stock on it’s own. This is unlike mutual funds because mutual funds are only traded once a day as soon as the market closes. This type of investment is appealing because an individual with an ETF can own hundreds, maybe thousands, of stock across different industries, or it can own stock in any particular sector. This may be a popular choice for diversification due to the fact that an ETF involves multiple assets within it. There are several different types of ETF’s. There are bond, industry, commodity, currency, and inverse ETF’s that all range on different particular needs. We recommend speaking with an investor in order to assess which type of ETF best suits your needs.
The next investment we’ll cover is a U.S. Series I Savings Bond. Like municipal bonds, a U.S. Series I Savings Bond offers a savings that earns interest though debt to the U.S. government. The interest on the bond will shift and change with inflation rates. Increasing the interest on these savings bonds will protect investors from purchasing too much during inflation. Additionally, an I savings bond allows fixed interest rates at purchase, while also adding an inflation interest rate that changes every 6 months. The only snag is that investors can only purchase up to $10,000 worth of I bonds online annually, with an additional $5,000 worth of paper I bonds. This may not be appealing for large investors and this might sway them to invest in a different government issue inflation hedge. Another snag is that it must be owned for one year before you’re able to redeem it. On top of that, any bond sold within the first five years will lose out on three months of interest.
Regardless of what type of tax-free investments you want to place you money in, it is recommended to get the professional opinion of a financial advisor before you give the green light. Find the best financial advisor who will find a plan that will suit your needs. Investing in tax-free investments doesn’t have to be confusing or overwhelming with the assistance of a professional financial advisor at Capital Choice Advisors.