Tax Treatment Matters: The Four Tax Buckets

Benjamin Haas |

No one wants to pay more than their fair share in taxes yet few have a good understanding of how their savings will be taxed over time. So a good way to gain a basic understanding is to consider this concept, the four tax buckets.

  • The first bucket is your taxable bucket - these accounts are funded with after tax dollars.
  • The second bucket is called the tax deferred bucket - these accounts are funded with pre-tax dollars.
  • The third bucket is the tax free bucket - funded with after tax dollars and accumulates to be withdrawn at a later date tax rate.
  • The fourth bucket is income and estate tax free - this is where you get into special arrangements like charitable trusts and irrevocable trusts.

Keep in mind, this requires transfer of ownership out of your estate. Our suggestion is that before deciding which financial vehicles are right for your retirement strategy, consider the tax impacts that may come into play and diversify your savings over time.

Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice. All content and information is for informational and educational purposes only. Tracking # T006055