When you are thinking on and planning out your finances, it is really important to understand characteristics you favor before you fund financial vehicles. Many people take into account risk, rate of return, or time period.
When I look places to park money, these are the top account characteristics I look for, and can help you find:
Tax deferred growth means you aren’t paying tax while the money is just sitting there.
Tax free distributions means you don’t have to pay tax when you are withdrawing the money.
A competitive return is important to outpace inflation.
High contribution limits are an absolute must. Sometimes it isn’t enough to max fund a 401(k) that has a cap on it.
Deductible contributions could be advantageous.
Collateral opportunities are very important. This puts you in a position where you don’t need to withdraw money and interrupt compounding interest, but can still leverage your money.
A safe harbor with no loss provisions and guarantees are very important for people with low to moderate risk tolerances.
A guarantee loan option can be very important when capital is needed quickly. Think about trying to take a loan against the equity in your home and the long process that requires certain qualification. Having immediate guaranteed access can be a life saver.
In case the loan option is utilized, an unstructured loan eases cash flow pressure. Payments when you can make payments, paying any amount you like, not having the loan reported to crediting agencies. This is especially valuable to small business owners.
Liquidity, use, and control of the money. This is another absolute must. The ability to access, use, and maintain control of the money at any given time.
Any additional benefits you look for when you are comparing financial vehicles?