There are still a few days before the tax season deadline in April 2022. I believe that many readers will face a new round of financial management choices after sorting out a lot of 1099B, 1099DIV, and K-1—simple investment in IRA , Define Benefit Plan, Mega backdoor Conversion, or thoroughly plan Tax Saving Investment Plan, Charity Donation Plan, or Superfunding Life Plan?
There will never be a shortage of new terms in the U.S. wealth management market, and their respective advantages are justified and justified.
Whether it is showing off mystery, or putting 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 good will never end.
Today, from the perspective of financial planning, I will 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 account and insurance wealth management account
A stock wealth management account is what we usually colloquially call “stock trading”. We choose to open accounts with different brokerage companies, such as Webull, Robinhood, Fidelity, and 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 to open accounts with different life insurance companies, such as AIG Life, Allianz Life, Fair Life, Pacific Life, etc.
Different insurance companies provide different insurance benefits for policyholders to choose from. In their respective life insurance accounts, policyholders are also provided with different insurance financial management strategies, or financial products issued and represented by insurance companies.
2. Comparison between retirement wealth management account and life insurance account
There are many types of retirement financial accounts, such as IRA, ROTH IRA, 401k, 403b and so on. A simple analogy, it is a stock wealth management account with added “tax incentives and benefits”.
There are a lot of comparisons between them and life insurance accounts on the Internet, and Investopedia’s introduction is very comprehensive, so I won’t repeat it.
In essence, these are financial accounts with “tax-saving functions”. Most of the former open accounts with securities companies, while the latter open accounts with life insurance companies.
3. With so many wealth management accounts in the United States, which one is the best?
Coming back to this cliché, the question I get most often is, which is good and which is the best?
My answer is, each one is fine. If the funds are sufficient, it would be best to have one of them all.
But the reality usually does not allow it. I will explain it in three stages.
The first stage
For those who are just starting out and are still in the low-to-middle-income stage, and cannot stand the toss, the financial backstop function of insurance companies is the most urgent need.
Looking ahead, raising income levels is often the main goal beyond this stage.
second stage
When I reached the middle-income stage, I gradually found that I was in the middle of the society. Looking forward, on the one hand, I need insurance coverage, and on the other hand, I also need to manage money for my retirement. The spare money on hand is eager to break it into two pieces, but the size of the annual discretionary funds is limited, usually limited to the annual limit of retirement accounts provided by individuals and companies.
Taking high risks in order to maximize returns is the goal of some families at this stage, and the stock market often becomes their first choice.
The third phase
For business groups, SME owners or professional professionals, when the income grows to the stage of high income, the amount of retirement account is often not enough for these groups.
For this group, the annual income ranges from 200,000 to 400,000, 400,000 to 800,000, gradually increasing to 500,000, and finally to more than 1 million. With the growth of income, age and experience, the preference for fixed income and low risk , showing a proportional growth.
Take some of the high-income families I have come into contact with who are engaged in the financial industry in the United States as examples. Their family financial management ideas are very simple – they are engaged in high-risk financial work, earn high income, and then put the funds into insurance companies for financial management , or use policy mortgages for premium loans, and use leverage to invest more funds into insurance wealth management accounts to obtain steady growth in wealth.
Gradually expanding the low-risk, fixed-income insurance and wealth management asset portfolio to prepare for the safety of funds and the inheritance of wealth is the primary goal of the family at this stage.
Column Summary
From stock investment accounts, IRA, 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 countless choices made by everyone.
From actual work experience, depending on the stage of life and the matching income, whether it is looking at retirement wealth management accounts or life insurance accounts-even for the same thing, you will experience “seeing mountains as mountains, seeing mountains as mountains” , see the mountain or the mountain “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. (full text)
