Tag Archives: mint

Maximizing Your Tax- Advantaged Money: How Much You Need to Make The Most of Tax-Free Money

Some of the best tax-advantages are provided by the government for retirement. For example just the 401K alone lets you put aside $19K per year into your employer-sponsored retirement plan. In addition you are allowed to contribute $6K (as of 2019) into an IRA. You can also open these accounts as a Roth account.

A Roth account, whether 401K or IRA allows your contributions to grow tax-free after you pay taxes upfront. This is in contrast to the traditional 401K and IRA which each are contributed to pre-tax but only grow tax-differed. Meaning, you aren’t taxed until you decide to take your money out.

But in addition to these two massive tax-advantaged accounts, you are also able to set aside an additional $3.5K into an HSA(Health Savings Account) account. The account is for the purposes of health expenses. However if you decide, say, when you’re 65 that your HSA is large enough and that you won’t need all of it, you can take out as much as you’d like for non-health purposes. The only catch is that the withdrawal is taxed.

So in essence your HSA can become a glorified IRA if you decide you don’t need it for medical expenses!

Each of these three options together amount to $28,500 a year. In order to take advantage of the full benefit you will need to earn about $85K to $95K in most states so that you can still pay your living expenses.

The bottom line: there are many options for tax-advanced money. It just comes down to making enough and budgeting wisely. So what do you think, is it possible for the average personal to maximize their contributions?

Money: Where it Comes From

Most people like money. They either collect it, or simply view it as a means to buy their next meal. The fact remains: money is useful. But why do we used money and where did it come from?

It is commonly thought that money arose as a result of the need to barter. This isn’t necessarily the case. There isn’t any society that we know of run completely on barter, even in ancient times. However people did barter a little, and the rest they either gifted or gave away as a form of debt.

At some point the use of debt was coupled with the use of commodity currency. Depending on the people group or the time period in which it was traded, money could be shells, wheat, precious metals, and eventually physical coins. It was after this first occurrence of coins around 600 B.C. by the Lydians that coins started to become more commonly used.

As time progressed, and more and more groups of people used coins, a representative form of money emerged. This was basically paper or some other useless thing, that was available to trade for something of value, like gold. These “certificates” became more and more widespread.

Other societies have since gone back and forth between representative money and actual commodity currencies. The U.S. started out with gold and silver coins as its money. At some point it started a gold certificate or what’s known as “the gold standard”. These could be traded in for a physical amount of gold. Then, with the actions of President Nixon, the gold standard was abolished and we have since been using what’s called fiat currency.

Fiat Currency is just paper, or electronic money, that can’t be turned in for any amount of gold or silver. The only way it has value is because the government says it does. The very nature of fiat currency, as with most currencies, is one of inflation. Since we have gone off the gold standard, prices have “gradually” gone up. What used to cost $1 now costs $10.

The beauty of our current system is that instead of bartering or becoming indebted every time we want something, we are able to trade currency for things of value. In giving someone a dollar, we are giving them something that is widely able to be “traded” for something else of value.

While our system of money in the U.S. certainly isn’t perfect, it has done a great job in facilitating the transfer of assets, resources and services from one side of the economy to the other.