Florida Office (239) 262-6577

New York Office (585) 383-0180


The Seven Wonders of the Investment World

Share On Facebook
Share On Twitter
Share On Linkedin
Share On Pinterest
Contact us

By Steven T. Merkel, CFP®, ChFC®

Most of us at some point have received one of those emails claiming that we’ve been chosen as “the lucky winner of a million dollar jackpot” or have seen an ad for a product which claims to fix everything for “just three easy payments of $19.99!” When something seems too good to be true it usually is. Despite the various over-exaggerated financial “opportunities”, there are still investment accounts which could make you go “WOW”. While no investment has a one-hundred percent guarantee of returns, these accounts have opportunities for tax-deferral, attractive contribution limits, tax deductions, and even tax-free earnings.

Employer Retirement Plan Match

As of March 2019, the U.S. unemployment rate has dropped to 3.8 percent and nearly all job sectors continue to add new positions. A growing job market means that many employers are having to offer competitive employee benefits packages to pull in new talent. One of the most popular, and often beneficial, is the employer retirement plan match. The most popular plans include 401(k) plans, 403(b) plans, 457 plans, and SIMPLE IRA’s. Many of these plans include a contribution match from the employer up to a certain percentage of a salary (basically free money). Also, contributions made to the account are typically tax-deferred until you start taking withdrawals. 

Tax-deferred Variable Annuities    

This is a retirement account option which is often overlooked. Similar to the previously mentioned retirement accounts, income and investment gains are taxed-deferred until you begin withdrawals. It may also provide a stream of income throughout retirement, which could be helpful for those concerned about outliving their current retirement account assets. During the accumulation phase, where payments are made to the account, the interest accumulates similar to a savings account. This could allow for great growth potential. In many cases, if the annuitant passes before the defined benefit is paid, the remaining benefits can still be passed to a beneficiary.

Qualified Tuition Programs (529 Plans)

With the rising cost of higher education and the growing need for a highly skilled workforce, tuition is a present concern for many parents and grandparents. The good news is that there are options for parents that want to get a head start on savings. 529 college savings plans are specialized savings accounts that are sponsored by states, state agencies, or educational institutions. 529 plans usually allow for earnings to be deferred from, federal and in many cases, state taxes. You are typically not taxed on the money you withdraw for qualified education expenses. Contributions are considered gifts for tax purposes, and as of 2019, yearly contributions of up to $15,000 per individual will qualify for the exclusion. They also allow a one-time contribution of 5 years’ worth of gifting for parents and grandparents. In 2019, that would equal $150,000 for a married couple.

Employee Stock Options

Being part of a company that offers this is similar to landing an underhanded half-court shot seconds before the bell rings. In other words, very lucky.  An employee stock option grants specified employees of a company the right to buy a certain amount of company shares at a predetermined price (typically discounted) for a specific period. There is typically a vesting period which an employee must wait to pass before purchasing. This allows companies to invest in the long term potential of an employee and allows employees to invest in their company. If you own the stock for at least one year after the exercise date they are also typically taxed at long-term gain rates.

Cost Basis Step-Up at Death

Losing a loved one is never easy. The tax consequences of inheriting their estate can often add unnecessary pressure during an already trying time.  The good news is that some of those assets may be eligible for the “step-up in basis” rule. This allows a readjustment in the value of non-retirement account inherited assets. When a decedent passes on qualifying assets, the heir receives a “step-up” in basis to its fair market value at the time of the owner’s death. The benefactor can then continue to hold onto the asset and defer any new capital gains until they decide to sell the stock. Keep in mind this does not apply to 401K and IRA type retirement assets.

Roth IRAs

Roth IRAs are often considered the golden egg amongst retirement accounts. With Traditional IRAs and 401(k) s, taxes are deferred until you begin to receive withdrawals. With a Roth IRAs, you make contributions with after-tax income and are therefore not required to pay taxes on withdrawals as long as you are over 65 ½ years of age and have had the account for at least 5 years. There is also no age limit for making contributions, and you are not required to begin taking withdrawals at 70 ½.

Health Savings Accounts (HSA)

Rising health care costs have never been in the spotlight more than they are today. With many insurance plans requiring high deductibles, and a single hospital visit often incurring tens of thousands in medical bills, it’s no mystery why HSA’s are being adopted by so many. These tax-advantaged medical savings accounts allow those with high-deductible insurance plans to make tax-free contributions to an account. Those funds can then be put toward qualifying medical expenses. Also, unlike Flexible Spending Accounts, there is no time frame in which you have to spend the funds. This means funds that you do not use can be rolled over to the next year and continue to grow.

In Some Cases Too Good To Be True IS TRUE!

Sometimes that needle in a haystack ends up being made of gold. While there are scores of false financial “opportunities” out there, some types of savings accounts do offer many of the “bells and whistles”. Having options when it comes to your investment accounts could provide you with ample opportunities to preserve and protect your family’s financial well-being.

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

Receive weekly updates from your CAS family!