--- title: "Money Minute Episode 3: Types of Money & Tax Diversification Part 2" description: Ryan is breaking down the last two types of money in relation to tax diversification today on the blog! image: https://blog.emford.com/hubfs/1-Feb-25-2022-03-57-06-38-PM.png --- - [** ](https://twitter.com/EMFord1925) - [** ](https://www.linkedin.com/company/em-ford-%26-company-llc/) - [Contact](https://emford.com/contact/) - [Owensboro, KY Insurance](https://emford.com/contact/owensboro-ky-insurance/) - [Henderson, KY Insurance](https://emford.com/contact/henderson-ky-insurance/) - [Louisville, KY Insurance](https://emford.com/contact/louisville-ky-insurance/) - [Client Center](https://emford.com/client-center/) - [Our RiskGuide Blog](https://emford.com/riskguide/) - [info@emford.com](mailto:info@emford.com) - [Call 270-926-2806](tel:270-926-2806) [![E M Ford](https://blog.emford.com/hs-fs/hubfs/raw_assets/public/EMFord_May2020/images/Logo-EM-Ford.png?width=200&height=445&name=Logo-EM-Ford.png "E M Ford")](https://emford.com/) * ** * - 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[** ](https://www.linkedin.com/company/em-ford-%26-company-llc/) [Financial Planning](https://blog.emford.com/tag/financial-planning) # Money Minute Episode 3: Types of Money & Tax Diversification Part 2 By [ Ryan McDaniel ](https://blog.emford.com/author/ryan-mcdaniel) February 25, 2022 [ No Comments](https://blog.emford.com/money-minute-episode-3-types-of-money-tax-diversification-part-2#comments-listing) In part 1 last week, I discussed the two best kinds of money - free money (by far thr best) and tax-advantaged money (a close second). Today, I will review the last two kinds of money - tax-deferred money and taxable money. **TAX-DEFERRED MONEY** Tax-deferred money is the type of money with which most people are familiar. It is our traditional IRA, employer-sponsored retirement plan or a non-qualified annuity. Essentially, you put money into an investment vehicle that will grow in value over time and you do not pay taxes on the earnings until you distribute them. Once the money is distributed, taxes must be paid. **TAXABLE MONEY** Taxable money is everything else and is taxable today, later, or whenever it is received. Some investors own stocks or mutual funds outside of an IRA or employer plan. The money that most likely purchased the stock/fund was taxed when it was earned or received. Any interest or dividends that the stock/fund pays throughout the year is taxable. And if you sell that stock/fund at a gain, you pay tax on the gain. I'm all for paying my share of taxes but three different taxes on one account seems a bit much.   OUT OF BALANCE More often than not, investors are out of balance with their kinds of money. They usually have a lot in tax-deferred money, quite a bit in taxable money, and very little in tax-advantaged money. One final question for you: - Do you believe tax rates will go up or down in the future? If you’re like 99% of Americans, you answered that you believe taxes will go up. Based on the state of America's current financial picture, I would agree with you. If tax rates are going to go up, be smart and start planning by tax diversifying today and avoid that tax bomb in retirement! # [Avoiding Water Damage Losses](https://blog.emford.com/avoiding-water-damage-losses) [ EM Ford ](https://blog.emford.com/author/em-ford) | [Personal Insurance](https://blog.emford.com/tag/personal-insurance) | [ No Comments](https://blog.emford.com/avoiding-water-damage-losses#comments-listing) When it comes to water damage losses, no season is safe as they can happen at any time. Each home comes with potential for water damage losses from pipes bursting to faulty construction and plumbing... # [Understanding Credit](https://blog.emford.com/understanding-credit) [ Ryan McDaniel ](https://blog.emford.com/author/ryan-mcdaniel) | [Insurance](https://blog.emford.com/tag/insurance), [Financial Planning](https://blog.emford.com/tag/financial-planning) | [ No Comments](https://blog.emford.com/understanding-credit#comments-listing) It’s difficult to imagine functioning in today’s world without credit. Whether buying a car or purchasing a home, credit has become an integral part of our everyday lives. Having easy access to... # [5 Ways To Save For Your Next Vacation](https://blog.emford.com/5-ways-to-save-for-your-next-vacation) [ John Gleason ](https://blog.emford.com/author/john-gleason) [ No Comments](https://blog.emford.com/5-ways-to-save-for-your-next-vacation#comments-listing) For many of us, last week was fall break. And many are already dreaming about their next vacation. October is Financial Planning Month, and I want to help you financially plan for your next vacation... # [Four Chart Friday With Ryan McDaniel](https://blog.emford.com/four-chart-friday-with-ryan-mcdaniel) [ Ryan McDaniel ](https://blog.emford.com/author/ryan-mcdaniel) | [Financial Planning](https://blog.emford.com/tag/financial-planning) | [ No Comments](https://blog.emford.com/four-chart-friday-with-ryan-mcdaniel#comments-listing) If you’ve talked anything market related with me, you no doubt know I love charts. I think you can learn so much and increase your understanding from them. Here are four charts I’ve been looking at... #### Recent Articles - [Avoiding Water Damage Losses](https://blog.emford.com/avoiding-water-damage-losses) - [Understanding Credit](https://blog.emford.com/understanding-credit) - [5 Ways To Save For Your Next Vacation](https://blog.emford.com/5-ways-to-save-for-your-next-vacation) ### Subscribe here #### About EM Ford EM Ford is an independent insurance agency offering a comprehensive suite of insurance solutions to protect you from the unexpected. 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