Posted by /Heather Xiong CFP®️ Column Series/ There are still the last few days before the tax season deadline in April 2022. I believe that many readers are facing a new round of financial management choices after sorting out a lot of 4B, 1099DIV, and K-1099 - simply investing in IRA. , Define Benefit Plan, Mega backdoor Conversion, or outright plan Tax Saving Investment Plan, Charity Donation Plan, or Superfunding Life Plan?
There is never a shortage of new terms in the US financial management market, and their respective advantages are also justified.
Whether it is to show off the mystery, or to pack old wine in new bottles, each financial management method has its own unique vertical market field and practical environment.
Therefore, the debate about which financial management method is better will never end.
Today, from a financial planning perspective,Let's talk about the most common stock accounts, individual retirement accounts (IRA/ROTH/401K, etc.) and life insurance accounts, which one is the best way to manage money.
1. Comparison of stock wealth management accounts and insurance wealth management accounts
A stock wealth management account is what we usually colloquially call "stock speculation".We choose to open accounts with different brokerage companies, such as Webull, Robinhood, Fidelity, IB.After opening an account, we can freely buy and sell securities products represented by these brokerage companies.
Life insurance account financing is what we often call "insurance financing".We choose differentLife insurance companyopen an account, such asAIG Life.Allianz Life, Fair Life,Pacific Lifeand so on.
Different insurance companies offer different insurance benefits for policyholders to choose from.In their respective life insurance accounts, policyholders are also provided with different insurance wealth management strategies, or financial products issued and represented by insurance companies.
2. Comparison of retirement wealth management accounts and life insurance accounts
There are many types of retirement financial accounts, including IRAs, ROTH IRAs, 401k, 403b, and more.In a simple analogy, it is a stock wealth management account with "tax incentives and benefits" added.
There is a lot of content on the Internet comparing them to life insurance accounts, and Investopedia's introduction is very comprehensive, so I won't repeat it.
Essentially,These are financial accounts with "tax-saving features", the former mostly open accounts in securities companies, the latter inLife insurance companyOpen an account.
3. With so many financial accounts in the United States, which one is the best?
Back to this clichéd topic again,The question I get most often is, which is good and which is the best?
My answer is that each is fine,If the funds are sufficient, all come to one, that's the best.
But reality usually does not allow it, and I will illustrate it in three stages.
The first stage
For those who are just starting out and are still in the low- and middle-income stage,Can't stand the toss, the insurance company's financial bottom line function, is the most urgent need.
Looking ahead, raising income levels is often the main goal across this stage.
second stage
When I reach the middle-income stage, I gradually find that I am in the middle layer of society. Looking forward, on the one hand, I need insurance coverage, and on the other hand, I also need to manage financial management for my retirement.The spare money on hand can’t wait to be split into two pieces, but the annual discretionary funds are limited, usually limited to the annual limit of retirement accounts provided by individuals and companies.
Taking high risks to maximize returns is the goal of some families at this stage, and the stock market is often their first choice.
The third stage
For business groups, small and medium-sized business owners or professional professionals, when the income grows to the stage of high income, the amount of the retirement account is often not enough for such groups.
For such groups, the annual income from 20 to 40, 40, 80, gradually increased to 50, until more than 100 million, with the growth of income, age and experience,The appetite for fixed income and low risk has grown in equal proportions.
Take some of the high-income families I have contacted who are engaged in the financial industry in the United States as an example. Their family financial management ideas are very simple - they work in high-risk financial fields, earn high income, and then put funds into insurance companies for financial management. , or use policy collateral forPremium loan, through leverage, more funds will be invested in insurance wealth management accounts, and the steady growth of wealth will be obtained.
Gradually expanding the portfolio of low-risk, fixed-income insurance wealth management assets to prepare for the safety of funds and inheritance of wealth is the primary goal of families at this stage.
Column summary
From stock investment accounts, IRAs, ROTH IRA retirement accounts, to life insurance accounts, I have said so much, in fact, to express that there is no such thing as "the best financial product" in the world once and for all.The concept of financial management is actually the sum of the countless choices everyone makes.
Judging from actual work experience, with different life stages and matching income, whether it is looking at a retirement financial account, or looking at a life insurance account - even for the same thing, you will experience "Looking at the mountain is a mountain, looking at the mountain is not a mountain, looking at the mountain is still a mountain"The three-stage process.
In this ever-changing growth process, a clear understanding and reasonable management of capital risks is the only constant core.Thank you for your attention, see you next time. (End of full text)
