Hey, Kevin Pritchett here
With Part 2 of my Tax Free Income Series. Last time I explained the ‘Tax Now’ bucket and how you want to remove as much of your wealth as possible from this ‘pay- tax- first- and- you- get- what’s- left‘ realm.
Question of course is…’remove it and place it where?
Tax Bucket 2: TAX LATER
Many of you have been taught to believe that the ‘Tax Later’ bucket is better and that you should stuff as much money as possible into your ‘Tax Later’ accounts e.g. IRAs, 401ks.
As you know, IRAs, 401ks defer any tax you would earn on all money in those accounts You get a deduction for putting money into an IRA/401k. Further,you are not subject to any tax until you take the money out of those accounts. And at age 70 1/2 you are required to take money out of your IRA and 401k accounts (Required Minimum Distribution RMD).
The dirty little truth is that putting money into an IRA, 401k is a HUGE TAX TRAP..a trap the government set for you the day you put money in. Here’s why
Tax On The Seed Or On The Crop?
Quick question…
If you could pay 10% tax on $100 or 10% tax on $1,000 which would you prefer? Tax on the $100 of course. Another way to ask that question is ‘would you prefer to pay tax on $100 of seed or $1,000 of crop?
Of course YOU would rather pay tax on the seed, $10,…and the government would much rather you pay tax on the crop$1,000 which is $100.
It’s the EXACT same situation with your Tax Later accounts. The government gives you a deduction to put money into your IRAs/401k (a bribe in fact) so that hopefully you get growth on that money over 20, 30 years. THEN when your IRA/401k account is big and fat (THAT’S another whole discussion) you take it out and BAMMM the tax..at ordinary income rates no less!!
Tax Lie=Tax Trap
The justification for this Tax Later strategy is ‘don’t worry about the tax you’ll have to pay…by the time you take it out you’ll be in the lower tax bracket…WRONG WRONG…SO VERY WRONG.
In fact, when you typically take money out of an IRA/401k you’re in the HIGHEST tax bracket of your life..especially when you account for the money you’re taking out which ADDS to your income for that year
Let me stress, that the ‘Required Minimum Distribution’ (RMD) requirement at age 70 1/2, the age at which you MUST take money out of your IRA/401k is designed as a guarantee you will have to pay tax to the government.
What sense does it make FOR YOU, to BE REQUIRED to take money out of your IRA/401k? Answer, it has NOTHING TO DO WITH YOU AND YOUR NEEDS…the RMD is designed specifically to make sure Uncle Sam gets its tax….hence the tax trap!!
Over the life of a typical IRA the tax on that IRA based due to either voluntary or mandatory withdrawals can exact as much as a 70% reduction in your accounts!!!
Ok Kevin…What Am I Supposed To Do Instead?
I can hear you now’ “man Kevin..I had no idea my IRA/40k was a problem…what am I supposed to do instead?” I get that same blank/terror/angered look on my clients’ faces the first time I explain the ‘Tax Trap’ of the Tax Later realm to them.
Don’t worry…there are several, legal, easy, proven strategies to take as much money as you want or need out of the Tax Now and Tax Later realms and ensure you create a TAX FREE income stream for yourself and your family….for the rest of your life. Fact is, the wealthy have known about these Tax Free strategies for generations…now its YOUR turn!!
Business Owners Especially Need To Get On This
Especially if you’re a business owner….there are ways to generate TAX FREE income streams using your business assets for not only you but future generations of your family. These strategies literally have the power to transform your family tree…FOREVER!!
Next time….I’ll explain .
Remember….
“Things don’t get better with neglect….”
Kevin Pritchett, Esq
Founder-The Founder/CEO Business Owners Collective (FBOC)
JPI Ventures, LLC
P.S. To get all the details on how to obtain TAX FREE income, for you using your business assets, put your email in the box to the right.
