Protea Wealth Management: Tax Planning

When constructing a portfolio and choosing the appropriate asset mix, it is also important to consider the different types of accounts and the various tax implications of each.

Taxation and flexibility are the primary reasons for having both qualified and non-qualified accounts.

Qualified Accounts

Qualified accounts are subject to preferential tax treatment and guidelines set out by the Employee Retirement Income Security Act (ERISA). Eligible accounts are best known as retirement accounts and are subject to special considerations depending on age, income, and employment status. Types of accounts include 401(K), IRAs, 403B, and 457.

Non-Qualified Accounts

Non-qualified accounts are funded with after-tax dollars and do not receive preferential tax treatment but offer greater flexibility and control. You can invest as much or as little as you want each year and withdraw the funds anytime. These accounts are tax-sensitive and subject to taxation on dividend earnings and (realized) capital gains. These accounts can be individually or jointly owned.