How to Decide Between Taxable and Tax Exempt Investments
Choosing between taxable and tax exempt investments depends largely on how you plan to handle your retirement. Dentists looking to sell their practice would do well to see a California dental broker. In addition to handling the sales process, a good dental broker in California can help with your retirement planning before you even put your practice on the market. For an overview geared towards dentists, however, read on.
What’s the difference
First, a quick overview of taxable and tax exempt investments. There is a lot of nuance to this topic that cannot be covered in any general guide. Experts would be able to tailor your finances to your specific needs. In general terms, however, the difference between taxable and tax exempt is who issues it. Tax exempt bonds are issued by the government (either federal or local), and you can avoid paying taxes either federally or locally, depending on the issuer. They tend to have small but reliable growth, and pay off in the long term.
Taxable investments offer more dramatic yields. They also better tolerate moving your money around. On the other hand, there is more risk, and the bonds aren’t backed up by the security of the government.
What’s your investment strategy
What is your investment strategy? One of the perks of owning your own dental practice is that you tend to have a high annual income and some key tax breaks available to you as a business owner. This usually translates into significant funds to funnel into investment. If you’re a naturally prudent saver, then tax exempt investments may be perfect for you. If you’re inclined to plunk your money down and leave it alone to grow, that works well. If you’re going to be constantly switching it up, don’t even bother with tax exempt. It won’t pay off for you if you move your cash too often.
When are you looking to retire
If you’re looking to turn your practice over to a California dental broker in the next ten years, you may not have enough time for tax exempt investments. If you’ve neglected investing in the past, you should aim for taxed investments, in an effort to bolster your investments through short term, opportunistic trading. This kind of investment takes skill; before launching into quick trading, consult a dental broker in California who can shed some light onto your situation.
What does your retirement look like
One final piece of the puzzle is what you expect life without your practice to look like. Would you like to still practice or lecture part time? Are you looking to finally break free and just live your life however you like? If you have dependents, your retirement cash flow needs may remain high even though you’re no longer earning an income. Your needs for a long term income will also affect how you should split your investments now.
A California dental broker can help you plan for your specific income and retirement requirements. In general, however, tax exempt investments are perfect for long term, moderate gain. If you’re going to pay fast and loose (and hope to cash in), you want taxed investments.