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Financial advisors have played a central role in the financial planning industry for decades, helping people (mostly the wealthy) to manage their money over time. Financial advisors are typically paid a commission based on their Assets Under Management, or AUM, or paid on a fee-only basis, meaning you pay them a flat fee directly for financial planning services. Some financial advisors get paid with a mixture of fees, commission, and/or AUM, and these are called ‘fee-based’ financial advisors.
A financial plan is exactly what it sounds like – a plan for your finances. Building a true financial plan typically involves evaluating your current financial situation (things like how much you make and how much you’re spending) and then developing a strategy for your future based on your personal goals and stage in life. Many people, especially those just beginning to focus on personal finance, find the idea of building a financial plan overwhelming. You might be thinking, “Where do I even begin? Do I even need a financial plan?” The short answer is – yes. Building a financial plan makes it far easier to reach your short and long-term financial goals because you have clear and measurable targets to reach. For example, if you’re looking to purchase a new house within the next two years, you can research how much you need to save each month for a down payment. Without understanding how much your dream home will cost and setting a time-bound goal, it would be next to impossible to build an appropriate savings strategy. What else should I know? If you decide to move forward with creating a financial plan (you should!) you may be surprised by how emotional the planning process can be at first. After all, building a plan requires confronting every aspect of your financial life – even past decisions you may now regret. Don’t let these negative emotions deter you! By working with Planswell, we blend technology with financial experts that get to know you and your specific goals. We work them into a coherent and flexible document that adapts to your life over time.
Often when we think of financial planning, the first thing that comes to mind is planning for retirement. But what about all of the other critical financial decisions we make and goals we set for ourselves long before we reach retirement age? The purpose of goal-based planning is to focus not only on retirement but on reaching all of these other goals – from buying a house, to owning a boat to going on a year-long adventure around the world! Goal-based planning tends to be more personal and customized. Everyone will eventually need to care for themselves in old age, but not everyone has dreams of buying a vacation home in the Italian Riviera!
One critical part of financial planning that tends to be put on the “someday” list is estate planning. Let’s be honest, no one likes thinking about what will happen after they’re gone, but end-of-life and emergency planning helps protect the assets you’ve worked hard to accumulate and grow. Your Last Will and Testament, trust, and Power of Attorney documents allow you to appoint people you trust to act on your behalf when you are no longer able to or temporarily incapacitated. These legal documents empower them to distribute and manage your accounts, properties and any other assets according to your written wishes. When and why do I need a Will? Creating a legal will is an important responsibility and can be created once you reach the age of majority in your province or territory. Life is unpredictable and can throw us curve balls at any point, but having a will and a power of attorney (sometimes known as a living will) can help us prepare for the unexpected and protect our loved ones from future chaos and complications. While all adults should have one, here are some key factors that drive people to create their Will: You recently got married or remarried, you are currently in a common-law marriage, you recently went through a common-law separation or divorce, you have assets such as a home or multiple properties, you have a child(ren) and/or other dependants, you own valuable heirlooms such as art or jewelry, you have assets that as a result of your death may cause tension among surviving family, you own a business or investments, and/or you have a cause that really matters to you that you wish to donate to after you pass away. In the event you pass without a will, the law says that you have died “intestate,” meaning that you haven’t left any instructions as to how you would like your property to be divided and distributed. In these circumstances, your property will be divided according to the laws of the state you live in. Usually, this is a set formula that the courts will decide on. There are many options when you’re ready to check this important task off your list such as visiting a lawyer if you need legal advice, or using an online will service if you have a simple and straightforward estate. Regardless of how you decide to create these legal documents, you’ll need to have some important conversations with those you’re assigning responsibility to such as your executor, power of attorney, and if you have minor children, their guardians. Make sure they are comfortable with these crucial and potentially life-altering roles. They should know about your important accounts, investments, properties and the documents they might need access to in order to represent you and your wishes.
An ETF is an exchange-traded fund. Depending on which ETF you invest in, the fund could be made up of any number of assets, from bonds to commodities to stocks. When you buy shares of an ETF you are buying a portion of the included assets. If the value of the assets goes up, your share value goes up but if the value of the assets goes down, your share value goes down – just like if you were purchasing shares of a stock on the stock exchange. ETFs have become extremely popular for individual investors lately, and for good reason. ETFs give investors who don’t have a lot of money access to a highly diversified and low-cost investment option. You can also buy and sell ETFs whenever. This last point is what truly differentiates an ETF from a mutual fund. While similar, a mutual fund does not trade like stocks on a stock exchange. If you’re new to investing, ETFs can be a great option, especially if you only have a modest investment to get started. As always, check in with a financial advisor to learn more.
Mutual funds allow you to your pool money with thousands of other investors and together invest it in various types of securities, like stocks and bonds. Mutual funds are managed by a team of professionals who are responsible for figuring out the best way to invest the pool of money. There are many benefits to investing in mutual funds for individual investors. First and foremost, mutual funds allow you to diversify your investments easily, without having to purchase many different individual securities. That’s because the team of investment professionals will select a wide variety of stocks and bonds to invest in on your behalf. You also get the benefit of a professionally managed account for relatively low cost. If you would describe yourself as an inexperienced investor or as someone who prefers a more passive approach to investing, a mutual fund may be the right fit for you. However, before investing in a mutual fund, it’s important to review how the fund has performed recently as well as examine its fee structure. Even low percentage fees that don’t sound like a lot, can add up to thousands of dollars lost over the years.
Bonds are issued by corporations or governments when they need to raise cash. Sounds similar to stocks, right? Well, the big difference between bonds and stocks is that bonds represent debt. Rather than owning a portion of a company like you would by owning shares of stock, when you purchase a bond you are providing a loan in exchange for regular interest payments. Once your bond reaches its maturity date, the original amount you invested (the principal) is returned to you. The only scenario in which you wouldn’t receive the principal is if the bond defaults. Bond defaults are rare, so bonds tend to be a less risky investment choice. It’s a good idea to include a mix of stocks and bonds in your portfolio in order to diversify. It’s also a good idea to review your ratio of stocks to bonds at various points throughout your lifetime as your goals and income streams change. As you get older, for example, you may want a more conservative investment strategy that leans more towards using bonds.
Stocks are issued by companies when they’re looking to raise cash. Once stock is issued, investors can choose to purchase shares of the stock at a particular price, which is determined by the stock market. In exchange for helping to fund the company, investors like you get to benefit from the profits (hopefully) and sometimes losses (bummer). If you choose to invest in stocks, you hope that the company performs well so the value of each share goes up. If the share goes up and you sell it at a higher price than your purchase price, you make a profit. Shareholders can also benefit from receiving dividends, which are a percentage of earnings that a company pays to its shareholders at regular intervals. Stocks can be a very lucrative investment vehicle, but with the possibility of higher returns comes higher risk. It’s impossible to truly predict future company performance, so it’s very possible that the stock you choose to purchase ends up losing value. Because of the higher risk of investing in individual stocks, it’s a good idea to include a mix of investment vehicles in your portfolio like bonds, mutual funds, or index funds in addition to or instead of individual stocks. Some people even opt out of investing in individual stocks entirely, choosing more diversified investment options instead.
In the same way that a bank can lend you money if you have equity in your home, a stock brokerage can lend you money against the value of certain investments in your portfolio. Generally speaking, you can borrow up to 50% of the purchase price of eligible investments. In other words, you may only be required to put up $5,000 of your own money in order to purchase $10,000 worth of stocks or bonds. By doubling your purchasing power, you also double your potential returns. If your $10,000 investment grew to $15,000, you could sell the shares, pay back your $5,000 margin loan, and be left with a $5,000 profit, effectively doubling your money. Amplifying the power of your money in this fashion is known as using “leverage.” However, the power of leverage works both ways. If your $10,000 investment were to decline by 50%, the broker could force you to sell your shares and you’d lose your entire original $5,000 investment, so there’s still no such thing as a free lunch.
An annuity is a type of investment vehicle that you can purchase from a bank, typically to supplement your income in retirement. The premise is relatively simple – you set aside a certain amount of money in your annuity and the money grows over a set period of time called the accumulation phase. Typically, you are unable to withdraw any money during this phase without incurring significant fees. At the end of this set period, you receive regular payments from the annuity, which is called the annuitization phase. Hopefully, your investment has done well and the money you originally set aside has grown to a larger sum. While the general concept of an annuity is simple, there are many different variables to consider if you are thinking of purchasing an annuity, like how long the accumulation phase should be, how long you want to receive payments and whether you prefer a fixed or variable annuity. A fixed annuity means you’ll receive equal payments during your annuitization phase, whereas a variable annuity means your payments will be dependent on how much your investment grew. If your investment does well, you could receive higher annuity payments. If your investment does poorly, your payments will be lower. Annuities can be a great option if you’re looking to secure another stream of income in retirement. However, the different features we discussed above are just a small fraction of the many details to consider when reviewing your options for an annuity. Check in with your financial advisor and don’t be shy about asking lots of questions before making your decision.
A retirement plan is different than a typical investment account (like a taxable brokerage account) because it provides specific tax benefits meant to encourage you to keep up with your retirement savings. What does it mean to have tax benefits? In the case of a retirement plan, like a Traditional IRA or your 401(k), your contributions are tax deductible, which means you can deduct your contribution amount from your income each year and only pay taxes on the remaining amount. For example, let’s say Susie makes $50,000 and contributes $4,000 to her Traditional IRA. She would only have to pay income taxes on $46,000 ($50,000 – $4,000). You also don’t have to pay taxes on any of your earnings as long they stay in your account. Instead, you only pay taxes on the money that you withdraw in retirement which is referred to as a tax deferral benefit. In plain English, this means that you not only get to contribute to your retirement savings tax free each year, but your savings also grow tax free – a great benefit that should not be overlooked. Because of these generous benefits, retirement plans have a few restrictions like annual contribution limits and specific eligibility requirements.
Imagine this. You’ve just retired and have spent the last 45 years diligently saving for this moment. Suddenly, your goal is no longer wealth accumulation, but rather spending the savings that you’ve built up over the years. You have to figure out how much is reasonable to spend each month while still saving enough to live comfortably, hopefully for the next few decades. This process is called retirement spending. If you’re a client of Planswell, you’ve already done this 🙂 What else do I need to know? Retirement spending is very similar to the process of decumulation. Decumulation involves strategizing about the best way to spend the savings you’ve worked hard to accumulate during your working years based on critical factors like your current income streams, investment strategy, personal goals, needs and plans for an inheritance.
Most of us spend our entire adult lives at least vaguely aware that saving for retirement is a critical aspect of our financial health. However, saving for retirement is only half of the puzzle. Once we actually reach retirement age, we’re presented with a new challenge – how to spend the savings we’ve worked hard to accumulate during your working years. This process is called deaccumulation and it requires a completely different skill set than what is needed to accumulate wealth. To spend effectively in retirement, there are critical factors to consider like: Income – what are your income streams? What is a reasonable amount to spend each month that allows you to enjoy life while still saving enough for the future? What are your needs and wants? Do you have any personal goals you’d like to reach while in retirement, like traveling the world or spending time with family? Do you want to leave an inheritance? Answering these questions will help form the basis for your deaccumulation strategy. Given the specialized skill required to successfully manage retirement funds, it may be helpful to consult a financial advisor for guidance. What else should I know? Some financial advisors may be well versed in wealth accumulation but may not truly understand the intricacies of deaccumulation.
If you plan on leaving your loved ones an inheritance or you’re planning to distribute your assets you will need a Last Will and Testament, and possibly a trust. Other things you can consider in addition to creating your will include setting aside money to cover your own funeral arrangements, outlining how you’d like your life to be celebrated, and specifying who you’d like to care for your beloved pets and any charities you’d like to donate to. If you pass without a will, you’re considered to have died intestate. This means that while the government doesn’t automatically get your estate, it does get to use state laws to decide how to distribute your estate and appoint your executor. Your estate includes all of your assets (anything you possess of financial or other value) and any debts you owe. What happens with your estate varies from state to state and it may be very different from what you would have wanted since the government doesn’t always take into account the specific needs of individual families. More and more services are being created to help make estate planning an affordable and painless process. Whether you visit a lawyer or use an online service, make sure to review your legal documents regularly to keep them up to date and ensure they truly reflect your wishes and life circumstances. Store your documents safely and make sure your executor (the person you appoint in your will to act on your behalf) knows where to find it.
With most of our lives existing online, paper trails are slowly becoming a thing of the past. Retirement is a great time to collect, review and create an inventory of your digital properties and assets. Not only for your own peace of mind but to help executors, power of attorney and trusted friends and family who may need access to this information after you pass away. So what are digital properties or assets? Just like physical assets, digital assets can hold monetary or sentimental value (and sometimes both!). For example, a monetized YouTube Channel or cryptocurrency could have considerable monetary value, while platforms like Facebook or Instagram may hold sentimental value. Each platform will have different policies about account transfers and access so it’s important to look into these to see what your options are. Also consider the items stored on your phone and computer like photos, unpublished journals, manuscripts, artwork etc. and what you’d like to happen to them after you’re gone. In the past these items could be found in a safety deposit box at a bank, an accordion file folder in an office, or at the very least, scattered amongst belongings at home. With the digitization of key documents, recordings, accounts and contact information, it’s now more important than ever to keep everything organized in one place and stored securely with your legal will and power of attorney documents. Whether you choose paper, a USB, an external hard drive or the cloud, the most important thing is the people you need to have access to it know where it is.
Amortization simply involves paying off debt with equal payments at equal intervals over time. An example of this is a fixed rate mortgage – your monthly payment remains the same throughout the entire life of your loan. Even though your monthly payments might look the same at face value ($500 a month let’s say), it’s important to understand how to break down each payment into two components – interest and principal. Each time you make a monthly mortgage payment, part goes towards paying off the interest on your loan, while the rest goes towards the principal (or the remaining amount you owe on your loan). At first, a significant portion of each of your mortgage payments goes towards paying interest, while a small percentage covers the principal. Over time, the amount you pay in interest each month slowly decreases, while the amount that goes towards the principal slowly increases. By the time you reach your last payment, it will be made up of entirely principal – and you’ll have paid off you loan! Now, you’re probably thinking – “That’s nice, but why does this matter?” When making decisions about amortized loans (home and car loans are common), many people make the mistake of looking at only the cost of each monthly payment. While this is an important factor, looking at only the total monthly payment means you aren’t able to see how much you’re paying in interest vs. paying down your principal. To uncover this information, it’s smart to create an amortization table that outlines how much you’re spending and where. That way, you can see easily and transparently, the actual cost of your loan. You may, for example, be getting a lower monthly payment, but be paying for your loan over a longer period of time, meaning you are paying more in interest than if you went with a higher monthly payment from day one.
A mortgage rate indicates the amount of interest a lender charges you when you take out a mortgage. It’s always in your best interest to get the lowest rate possible, because a lower rate means lower monthly mortgage payments. You can either choose a fixed-rate mortgage (interest rate stays the same) or a variable-rate mortgage (interest rate fluctuates), which are both described below. So, why are different mortgage rates offered? Lenders prefer working with people who are likely to make their loan payments in full and on time. To determine how likely this is, banks look at your credit score. If you have an excellent credit score, you’re more likely to quality for a lower interest rate. If you have a lower credit score, you will likely get a higher rate or, if you have really poor credit, you may not qualify for a loan at all. When selecting a mortgage, do your homework! Finding the best deal will likely involve shopping around to several different lenders.
An adjustable-rate mortgage is exactly what it sounds like – a mortgage in which the interest rate fluctuates. An increase in the interest rate means that your monthly mortgage payment will go up, while a decrease in the interest rate will make your monthly payment go down. Typically, adjustable-rate mortgages offer a low introductory interest rate – lower than the rates for a fixed rate mortgage. This can be a better deal initially, but once the introductory offer is over, it’s difficult to predict what your monthly payments will be. This makes financial planning more difficult. If interests rates went up significantly, you could be responsible for a monthly payment you can’t afford! Even though adjustable-rate mortgages are riskier than fixed rate mortgages due to their unpredictability, there are some scenarios in which it might make sense to choose one. You might, for example, plan to pay off your mortgage before the introductory period is over (so you avoid dealing with fluctuating rates entirely) or you might be confident that interest rates will go down, bringing your monthly payment down with it. Either way, before selecting a variable or fixed rate mortgage, talk to a financial professional and carefully weigh the pros and cons of each option to determine what’s right for you.
A fixed rate mortgage offers the same interest rate for the entire length of your loan. The benefit of a fixed rate mortgage is that you can predict exactly what your monthly mortgage payments will be – a great advantage for financial planning purposes. Fixed rate mortgages are often compared to variable rate mortgages, which feature fluctuating interest rates. Variable rate mortgages typically offer a low introductory interest rate – lower than the rates for a fixed rate mortgage. This can seem like a really good deal upfront, but it’s possible for the interest rate to rise over the life of your loan, meaning you could end up paying much larger monthly mortgage payments. Before selecting either a fixed or variable rate mortgage, it’s important to weigh the pros and cons of each option to determine what’s right for you and your financial situation.
When you borrow money from a bank, the bank charges interest as payment for letting you use their money. The amount of interest charged is expressed as a percentage of the principal – or the total amount of the loan. The same works in the opposite way. When you put money in your savings account, you receive interest payments in exchange for letting the bank use your money while it’s sitting in your account. You’ve probably seen interest rates advertised using the acronym APR. APR stands for annual percentage rate and it takes into account both the interest rate itself as well as lender fees. When borrowing and lending money, understanding the interest rate and its impact is critical to ensuring you make an informed decision. When selecting a mortgage, for example, interest rates can have a significant impact on how much you pay in your mortgage payments each month.
Let’s say you took out a variable rate mortgage and interest rates are climbing. You’re starting to get worried that you won’t be able to keep up with your mortgage payments because higher interest rates mean higher monthly payments. What can you do? Are you stuck with your original loan terms forever? No, not necessarily thanks to the concept of refinancing. Refinancing simply means replacing an existing loan with a new loan, presumably with better terms. Basically, you take out a second loan, use the new loan to pay off the first, and then pay back the new loan in monthly installments just like before, only with a better deal. Refinancing can mean lower monthly payments, a lower interest rate or a change in the length of the loan, depending on what you negotiate with your lender. Refinancing is also a time consuming and sometimes expensive process, so it’s important to think through your options carefully before refinancing.
Use your home equity to borrow money, tax-free. A reverse mortgage allows you to take money from your home equity – tax-free-, without having to pay monthly mortgage payments. Unlike a regular mortgage that dwindles away as you pay it off, this type of loan rises over time as interest and loan fees accrue. This can come in handy if you’re reaching a retirement age and are sitting on a pile of home equity but haven’t hit your retirement goals. In order to tap into your home equity without selling and downsizing, a reverse mortgage can come into play. The older you are and more equity you own on your home, the bigger the loan you can secure. How to qualify: First off, you must be at least 62 years old – as well as your spouse – and a homeowner to be eligible for a reverse mortgage. These loans can come in the form of a lump-sum payment, planned advances, or a combination of the two. Keep in mind, there are restrictions in Canada that limit the maximum amount you can receive. When it comes to paying back the loan, reverse mortgage balances are only due when the homeowner dies, sells the home or moves away permanently. Deciding if this is a good idea: Before getting a reverse mortgage, make sure to weigh your options. These loans can be costly and eat away at your equity with interest and loan fees. There are also risks of not being able to pass your home down to your family after you die. That’s why it’s always a good idea to get outside advice about how a reverse mortgage could affect your financial plan.
If you are a first-time homebuyer and U.S. citizen, then under the Taxpayer Relief Act of 1997, you are allowed to withdraw up to $10k from an IRA to use as part of a down payment for building or buying a home. However, you will be subject to income tax if this is withdrawn from an IRA. If you withdraw from a Roth IRA, the money will not be subject to income tax. Normally it isn’t a good idea to use your retirement money, but if you really need more money as part of your down payment, this could be an option.
Buying a home can be one of the most rewarding purchases in your lifetime. That’s why it’s always important to plan for what happens to your property and loans after you pass. Most people fear that their outstanding debts will be passed on to their family, but the good news is that in the USA, the mortgage stays with the home, not the person. This does not mean it goes away if you pass away. If you are the sole owner of the property and mortgage, it must be paid from your estate. In most cases, if you bought property with your spouse, they will take over the mortgage and the financial institution may reassess the terms depending on the situation. If you have a property you would like to gift to a specific heir, it is important you make these wishes known in your legal will. Further, you will want to specify if you want the estate to pay off any debts on the property so the person inheriting it is free and clear if that is your intention. Review your financial and estate plans regularly. You’ll want to understand what types of debts will need to be paid and what your insurance policies will cover before you are able to divvy up your assets as you would like. In the event of a medical emergency: Beyond your Last Will and Testament you should prepare your Power of Attorney documents. While the name of these documents may vary from province to province, the purpose is similar: if you are incapacitated, who do you choose to speak and act on your behalf?
What is it? Term Life insurance pays a single tax-free lump sum benefit when the insured person passes away. Generally, we recommend enough Term Life insurance to pay off any debts that might be left behind, and to replace enough income so that the surviving family members can keep their home and maintain their standard of living. Why you should have it. Term life insurance is the most simple and cost-effective choice for most people. You simply specify how much coverage you need and how long you need it. When it expires, you can take out another policy if you still need the insurance.
What is it? Whole life policies are “permanent,” meaning they never expire. They also add the possibility of building up an investment within your policy that you may be able to cash or borrow against in the future. What’s the catch? The downside is they are much more expensive and complicated than term life. One exception is individuals who can benefit from the ability to borrow against the policy to extract money from a holding company in a tax-efficient manner. If this sounds like you, we can show you exactly how this works.
What is it? Disability insurance usually pays a tax-free, monthly benefit equal to 65% of your salary until you’re able to work again or until age 65, whichever comes first. This amount is designed to give you comparable take-home pay to when you were working. Why you should have it. It is estimated that about one person in three will be at least temporarily disabled due to an illness, accident or injury at some point in their lives. This could be from something that happens on the job or something in your private life, such as a car accident, a back injury, or a medical disease.
An IRA stands for “individual retirement account” and this means you don’t have to have a retirement plan through your work in order to save, because you can set these up on your own. However, in order to save in an IRA, you must have earned income for the year. A Roth IRA is different from a Traditional IRA because you save money for retirement that is ‘after-tax’ money – this is money that you have already paid taxes on. Another difference is that a Roth IRA allows your retirement savings to grow tax-free – when you retire after age 59 1/2 and take qualified distributions, you don’t have to pay tax! This is the major advantage of a Roth IRA over a Traditional IRA. However, there are rules about who can contribute to a Roth IRA, so make sure to do your due diligence to see if you can contribute to one. In general, IRAs can be a great way to save for retirement either on their own or in combination with a workplace retirement plan.
An IRA stands for “individual retirement account” and this means you don’t have to have a retirement plan through your work in order to save, because you can set these up on your own. However, in order to save in an IRA, you must have earned income for the year. A Traditional IRA allows you to save money for retirement in a ‘tax-deferred’ manner – this means you don’t pay taxes on the money you keep in the account until you start taking money out for retirement. Once you take money out, then you will be taxed on the money. A major difference between a Traditional IRA and a Roth IRA is that anyone can contribute to a Traditional IRA. In general, IRAs can be a great way to save for retirement either on their own or in combination with a workplace retirement plan.
Retirement plans are a great way to save for when you eventually stop working, because they have special tax advantages over normal brokerage accounts. This is a great benefit that retirement plans provide because they give you the option to save for retirement in a ‘tax-deferred’ manner. This means you get to skip paying taxes on the money you save right now and will then pay the taxes later when you take it out in retirement. Alternatively, some workplace retirement plans allow you to save in a ‘Roth’ manner, meaning you pay taxes on the money you save now and then don’t have to pay taxes when you take it out in retirement. Doing your own research and talking with a financial advisor are usually the best ways to figure out which option is best for you. Workplace plans, like your 401(k), are also often excellent ways to save for retirement because employers often offer a ‘match.’ This means that they will contribute a certain percentage of your income as long as you also contribute at least a certain amount. For example, your company might contribute 5% of your salary to your 401(k), but only if you also contribute 5% of your salary to your 401(k). Many people think of this as ‘free money’ because it is money they give you in addition to your salary, but in truth, it is money you have earned as part of your deal working for a company. Another major benefit of saving money in your workplace retirement plan is that they have higher contribution limits than IRAs, or individual retirement accounts. The more you can save for retirement, the better!
Saving for college? A 529 plan is a great way to do so. A 529 plan is a ‘tax-advantaged’ plan, with the most common type being a savings plan. This plan allows your money to grow tax-free, as long as you use the money for qualified education expenses. The other type of 529 plan is a pre-paid tuition plan, which allows you to pay for the cost of a specific college now to lock-in current rates, if you think the cost of college will go up. In general, the 529 savings plan is much more flexible, since you can use the money to pay for education expenses at many different educational institutions.
A taxable brokerage is an account that you open at a brokerage firm, who holds your investments for you. Money in a taxable brokerage is, as the name implies, subject to tax. The investments will be subject to capital gains taxation if they grow (hopefully) and will be subject to capital losses if they lose money (bummer). Taxable brokerages come in many different forms, giving investors lots of options to invest in, such as stocks, bonds, mutual funds, ETFs, and so on. These accounts are different from your retirement accounts and allow you to take your money out at any time (although you will still have to pay taxes if you take the money out and it has grown). You can also put in as much or as little money as you want, unlike your retirement accounts.
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