December 11, 2023 | 3 MIN READ

The Tax Triangle

What's the best way to provide for your family today, while planning and protecting their future?

To help ensure you're getting the most out of your money:

  • Your independent tax advisor can help you to understand the tax treatment of the different financial products available to you.
  • A Citi Personal Wealth Management Wealth Advisor can provide a complimentary financial checkup to help you plan and invest in a way that properly balances your short- and long-term goals.

Deciding How to Invest. As you discuss your financial situation with your tax advisor, this Tax Triangle can be a handy reference tool to better understand and talk with your advisor about ways to save in tax-advantaged, tax-deferred, or taxable investments, or a combination among these categories.

There are many ways to plan for your financial future, and one way is Considering Cash Value Life Insurance. When evaluating what investment strategy makes the most sense for saving for goals like retirement and college savings, you can also consider the role cash value insurance may have in protecting those assets from any unexpected "what ifs" in your life. Cash value life insurance offers the advantage of an income-tax-free death benefit and the potential of income-tax-free withdrawals and policy loans, provided the policy is properly structured and remains in force.1

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These assets are funded with after-tax dollars, may have the option for tax-deferred growth and may be distributed income tax-free, depending upon the circumstances. Before investing to leverage any potential tax benefits, talk with your independent tax advisor.

  • Roth IRA
  • Municipal Bond3
  • Cash Value Life Insurance1
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Currently Taxable

These assets are funded with after-tax dollars and every year the owner receives a 1099 form for any interest or dividends earned. This category is often beneficial for its high liquidity.

  • Deposit Account
  • Checking
  • CDs
  • Money Market
  • Investment Account
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These assets typically provide deductible contributions and tax-deferred growth, but upon distribution are taxed as ordinary income. This is often the only category many people utilize for retirement.

  • 401(k)/403(b)
  • Traditional IRAs
  • Pension
  • Qualified Annuities4
  • Qualified Retirement Plans

1 Generally, policy loans from non-Modified Endowment Contracts (MEC) are not subject to income tax, while any withdrawal from a MEC is taxed as ordinary income, to the extent of the policy’s cash value exceeds its basis.

2 Please contact your advisors(s) for specific contribution limits and income eligibility of each account or product.

3 Coupon payments from a municipal bond are exempt from federal income tax, with certain exclusions. Appreciation on bonds purchased at a discount may be subject to income tax.

4 Non-Qualified Annuities are funded with after-tax dollars, have tax-deferred growth, but distributions of any growth are taxed as ordinary income.