What is in Your Financial Inventory?

William Miller |

There are many different investment account types and insurance products that you can have in your financial inventory. Each of these accounts/products have pros and cons depending on your situation. The important question is, what is right for your financial inventory?

As your career develops and you get older, you will add more accounts/products to your inventory.

“Funding the Right Buckets”:

When I talk about buckets with people, I am talking about how the investment account is taxed. Taxes play a key role in the both the short term and the long term. The goal with “Funding the Right Buckets” is to maximize the contribution to the investment account but doing it in a tax efficient way.

There are 3 ways an investment account can be taxed:

  • Tax Deferred (401(k), 403(b), 457, etc.)
  • Taxable (Brokerage Accounts, UTMA, UGMA)
  • Tax Free (Roth IRA, 529 Plan*, Health Savings Accounts**)

*529 Plans are tax free when the distribution is used for a qualifying educational expense.

**Health Saving Accounts (HSA) are tax free when the distribution is used for a qualifying medical expense.

When you are thinking about which of these accounts to put in your inventory some question to think about are:

  • Are the contributions you make tax deductible?
  • Do you have to pay taxes on the gains or dividends?
  • Are you able to access the money without penalty?

Just like with your portfolio it is important to be diversified from a tax standpoint. Tax laws are always changing so by having a mix of how the investment accounts is taxed you will be able to have more flexibility when and if tax laws change.

“Their Future”:

I do not have any children right now but one common topic that comes up a lot with clients that do is how they can help their child in the future with school or setting them up for success. During the conversion about “Their Future” it usually revolves around how they should save money for their children. While you can save money in a bank account or buy bonds that mature in 15 years and accrue a little interest, there are other options that have the potential to grow a foundation.

  • 529 Plan

Both are investment accounts that can be invested in the stock market like any other account, the difference is in how they are taxed and how the money can be used.

A 529 plan is generally used for school expenses because of the tax-free benefits. However, if the money is used for something other than an educational expense there is a 10% penalty. If you would like to learn more about 529 Plans check out the College Savings Plans Network for more information.

UTMA/UGMA accounts are very similar to your normal brokerage accounts. The account is owned by the child but is controlled by a custodian (generally a parent/guardian). The child then gains control of the account once they reach age of majority (between 18-25 depending on the state). At that point, the UTMA/UGMA could be used for whatever the child wants without penalty. Just as they would be in a brokerage account, taxes are required to be paid annually on the gains and dividends.

“Protecting You and Loved Ones”:

Insurance is a topic that most people do not like to have, however having the appropriate coverages can make a big difference. Insurance at its core is just transferring the financial risk to an insurance company rather than you holding on to it. When you get into a car accident your insurance company pays for the damages and liabilities, if you did not have insurance you would be responsible for the damages.

 Some of the potential insurance you may come across:

  • Home/Renter/Condo
  • Auto
  • Personal Umbrella
  • Life
  • Disability
  • Long Term Care

By having the appropriate coverages, you will not only be protecting yourself, but you will also be protecting your family and their livelihood.


Everyone has things in their financial inventory. The key is to know what you have in it, what purpose it has and what the benefits of it are.


*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax, legal, or investment advice and may not be relied on for purposes of avoiding any federal tax penalties. Individuals are encouraged to seek advice from their accountant, financial planner, and counsel. Neither the information presented, nor any opinion expressed constitutes a representation by WM Wealth Planning as a specific recommendation to the purchase or sale of any securities/investment. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by WM Wealth Planning for educational purposes.*