People think that the way to save for retirement is to defer their money. However, what will you do if you learn that you can’t be able to get all of your savings due to tax? Chuck Omphalius reveals that neither 401(k) nor social security are the best places to invest your retirement because the government will deduct the effective tax rate to your hard earned money. Chuck talks about a program he created with his team called Bad Uncle Sam wherein they developed strategies and solutions to the problem. Find out more as he talks about it here.
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Chuck Omphalius Returns To Talk About Bad Uncle Sam
Hopefully, you’re staying tuned in with the economy. There are a lot of things going on in this country that are moving markets up and down. We can have a great four and a half days, something happens Friday at noon and go down. That’s a little foolish when it comes to your hard-earned money or what I call your stored labor. Your stored labor is the money you have put in 401(k)s and IRAs. We’re going to get into some juicy details in this show. We have my good friend and colleague, Chuck Omphalius. Chuck, welcome to the show.
Thanks for having me.
Chuck is down from New York and we were busy meeting with people in New Orleans and Baton Rouge. Chuck, why don’t you tell our audience a little bit about yourself and that you’re not the typical Yankee? You are a Yankee from the Northeast. He had to educate me because when I think of New York, I think of tall buildings, skyscrapers and very liberal people. That is not where you live and you’re not liberal by any stretch of the means. Tell our audience a little bit about yourself and where you’re from and what you do.
I live in the Hudson Valley. It’s 60 miles North of New York City where I live. I live in a place called Dutchess County. It’s a red county. In fact, all but six counties in New York are red. Everybody makes that mistake. I was talking to somebody, you can drive for well over twelve hours and never leave the state of New York. People have no idea how big it is. The five boroughs themselves is where most of the population is. That’s in the southernmost part of the state. They are The Bronx, Brooklyn, Queens, Staten Island and Manhattan. With commuters in and out on a given day, about eighteen million people are in the five boroughs. It’s a pretty massive population. Manhattan Island has got most of it. It’s about eight million people. The whole island is less than twenty miles long and less than two miles wide. People are on top of each other.
You live about 70 miles North.
I have five acres of land. I have deer in my yard. People are skiing twenty minutes away from me. There are hunters. There’s fishing going on. My soon to be son-in-law, grew up on a farm about twelve miles from where I live, a horse farm and a lot of apple orchards. It’s called the Big Apple for a reason. It’s not quite the stereotype that we got blamed for. The problem is we’re just outnumbered.We spend and waste money more than we take in. Click To Tweet
You all have some elected politicians that if I saw down here in Louisiana, I might charge them, form tackle and take one for the home team. I do some work with Chuck and his team in New York. He’s part of a group that I align with when we are talking about the future of taxes. I said before on the show, if you’re reading this and you think we don’t pay enough in taxes, don’t call me because we’re not going to get along. I’m sure the US Treasury Department is not going to turn away your extra payment in taxes. Do your homework and pay more taxes if you want to. I think as a citizen, we are severely overtaxed. The government does a terrible job of managing money. Every time that we have to pay our Social Security, the government is giving us the middle finger. They’re saying, “You aren’t that good at managing money. Give us your money and we’re going to call it Social Security.”
The funny part is that that same group of people and it changes over time, it’s a collective group over time. They’ve amassed over $23 trillion in debt, yet your statement is true. They want to keep collecting your money and tell you that they’ll do a better job of managing it and then when you retire, they will give it back to you in some form.
I’ve been talking to people and saying, “If you’re overfunding your 401(k), give me a call. I encourage to contribute the minimum amount to get the match from your company. If you’re contributing more than that and you’re open-minded, call me. Let me show you what I’m doing with my own money. Let me show you what the wealthy are doing. You don’t have to be wealthy to do this. We scale it down to your income.” Why do you think the 401(k) is not the best place to put extra money?
Simply put, it’s out of style. If you go back to when the 401(k) came into place, when the IRS allowed us to start deferring our income for retirement purposes, it takes you back to the late ‘70s. If you look at our tax code in the late ‘70s, as you mentioned the future of taxes, you don’t know anything about the future of taxes until you understand the history of taxes. If you don’t know anything about history, then you’re to repeat it. If you look at the history of our taxes, I’m talking pre-Reagan. I’m not just talking about pre-Reagan, listen to AOC on CBS, on 60 Minutes or listen to the Liberals and that’s exactly what they want. They want pre-Reagan tax eras.
What people don’t understand is there were 22 tax brackets back then. Now, there are six. The highest bracket was paying over 70%. I talk to Middle America’s people all the time. We worked together in this market in Louisiana, Baton Rouge and New Orleans. I work in Dallas, Tampa, San Francisco and then I worked back home in New York as well. I have a good mix of clientele all over the country. What I tell them all the time is I use an example. There is an example that if you take a married couple whose making $120,000 and you plug that through the tax code, the Tax Cuts and Jobs Act, and you put it through all the calculators. The effective tax rate, which means the blended-up percentage that they pay after their standard deduction is 13.1%.
Think about that. You own your income, but you have a partner. Your partner is Uncle Sam and that partner owns 13.1% of your business. The only thing wrong with this partnership is although you own the majority share of that income, you don’t get to make the rules. They do. If you take that same married couple and I’m even going to reduce their income for inflation purposes. If you put them in 1978 during the Carter administration, they’re making $75,000. $75,000 back then is equivalent to about $120,000. We can argue about inflation, but round numbers. If you take a married couple in 1978 and you plug them into the pre-Reagan tax code where there were 22 brackets and the highest was paying over 70% and you blend and come up with an effective tax rate, that married couple is going to pay 51%. It’s insanity.
You can argue that it’s what builds our roads. It’s what pays our government worker’s pensions. It’s what defends our country and all those things. The problem is what are they doing with the money? What are they doing with it? When we were collecting that type of money, we didn’t have a federal debt. It was below $1 billion and now it’s over $23 trillion in the same timeframe. If we were collecting that money and doing something well with it, then that would be at least an argument for the other side. This idea that they can spend it better than we can, it’s hard for me to swallow.
For me, there’s no cookie cutter approach to this. Every person that we meet with is different. For some folks, the Social Security because they’d done well, they might not ever get a dime. They’re going to live a good life whether they’d get no dime or not. For some folks, when I can show them how to avoid paying taxes on Social Security, which was crazy because you’ve already paid taxes on Social Security. The way the government dangles the 401(k), they entice the person to put money in the 401(k) to postpone the tax. When you retire, if you have the majority of your wealth like most Americans do in a 401(k), then they’re going to penalize the Social Security because you have money in the 401(k).
All we’re doing is following the tax code. The greatest impediment to wealth is taxes. There are things in certain parts of the tax code, 7702, 101(a), 101(g)(1), 72(e), 72(e)(5) and US Code 86. I’m not smarter, I’m reading that from a book, but it goes into the strategy that we deal with. It comes down to if you believe taxes are going to be higher in the future, then there are some steps you should be taking to avoid that. It’s so backwards. You put money into a 401(k) to kick the can down the road on paying that tax, yet to be in a higher tax bracket in the future. It doesn’t make sense.
I have an example. My father started working in the ‘70s. When they offered the first ability to set up a 401(k) or defer income, it was at a time where his effective tax rate was probably close to 50%. He was that married couple making $75,000 a year. Under that circumstance and that environment, it was pretty smart for him to defer taxes. If he had an extra $5,000 that they want to save for later, why give the government $2,500 of it and try to save $2,500. I had to tell him, “You hit the tax lottery,” because when he deferred it, what do they do? We put it in the markets.
Where were the markets in the ‘70s? They were in the tank. In 2008, he retires. The Dow was at $2,500 back in the late ‘70s, now it’s at $25,000. He’s got ten times growth, he deferred the money at 50% and our administration gave them a tax code that he gets to live in retirement at, where he’s paying taxes that are as low as ever. His income is on sale. He hit the timing lottery of the 401(k) because he deferred it when it was high, and the markets were low and now he’s using it when taxes are low and the markets are high.
I think that’s inversed now.We like to hope for the best, yet we plan for the worst. Click To Tweet
Here’s the problem. What most people don’t understand is there are too many sheep out there. People think that the way to save for retirement is to defer their money, except think about what I said. Now, you’re deferring it into a market that’s high and you’re paying very little tax on it. I’m going to be 47 years old and I hope I got another 40 years in me. If I’ve got three or four more decades, it might be naive enough to think that for some two-year window during that timeframe, that there’s not going to be a President that is Liberal by persuasion. That there’s not going to be within the Congress and the Senate that’s also leaning left. They’re not going to be able to pass their tax code a lot like Donald Trump did when he had control of the House and the Senate and they could have passed the tax code. What happens if one of these Social Democrats, when one of these candidates gets control, they get some support and they pass a tax code? All of a sudden, we’re living like we’re in Scandinavia.
Are you prepared? Am I prepared to defer my income when it’s on sale into markets that are high? What happens when I’m 65? What happens if we are in a high tax environment? What happens if it’s back like the ‘70s? What happens in those high tax environments? Do you know where the stock market is? Because they’re taxing corporations high again, the stock market stagnates. I don’t want to be stuck in a situation where I deferred my money when it was cheap or when taxes were low. I put it into markets when they were high and it’s my turn to retire and taxes are high again. The markets are in the tank again. I did the exact opposite of what my father did.
It goes back to the old story of if I go to the co-op as we say down here, the co-op is where they sell seed and stuff and deer corn for our food plots and fertilizer, ryegrass and all that. I go up there and I put a bag of seed on the counter and the cashier says, “Mr. Day, do you want to pay the tax now on the seed or we’re going to come back in six months and tax you on the harvest? What do you want to do?” It’s a juvenile example, but it illustrates my belief in taxes. I’m going to pay the tax now. Why do I believe that taxes are going to be higher?
Our national debt is the main thing. I’m looking at that. As you said in one of the presentations, we have obligations. You made a comment about, “We don’t want to get rid of the military, we need the military, but we don’t have to have them.” The government has made promises to the Social Security recipients so I believe taxes will be higher. I would rather pay taxes on the seed and not the harvest, mainly because we don’t know what the harvest is going to be. I don’t believe tax rates in the future are going to be lower.
You touched on it a little bit and I’m going to expand on it. Our government has certain obligations that they can’t turn away from. You’ve got Medicare, Medicaid, Social Security and you’ve got the federal debt. Those are four things that we’ve already as a country made promises to somebody else to pay. Unfortunately, we owe most of the federal debt to the Chinese government. American citizens owed Medicare at age 65, they paid in their whole life. Medicaid, if you become ill, need help or you’re underprivileged and need help now with your medical, the idea of Social Security that you paid into, those are obligations that our country, our politicians had put in place and signed up for.
We’ve all like good citizens been living under that structure and that’s due. That money is owed, our population is aging and living longer. The Baby Boomers have reached retirement. We’re right in smack in the middle of them retiring. People are living longer and those numbers aren’t going away. Our federal debt at over $23 trillion, just the interest on the federal debt. You take those three entitlement programs I named Medicare, Medicaid, Social Security, and you add in the payment on the federal debt. Those four obligations are already swallowing up every dime and revenue that we make in taxation. What are the other big-ticket items we pay for? There are lots of them. There are hundreds of them.
There’s infrastructure and there’s military. Do we have to put money into infrastructure? We should, I hope we do, but we don’t have to. There’s no promise to. Do we have to defend this nation? Do we have to have a military? I’d like to think that we need one. Unfortunately, with some of the scary stuff going on out there, we should have one, but there’s no law that says we have to have one. These obligations can be cut. These programs can be slashed. The other obligations I discussed, they can’t. The interest on the federal debt, think about the idea of having a credit card. You’re a married couple, you’re starting a family, you’re 30 years old and you get a credit card. You get the magic Federal Reserve credit card.
This credit card allows you to put every item that you pay for all year long on the credit card. At the end of the year, you don’t have to pay the principal. You’re just going to pay the interest then the following year, you’re going to run up every bill again. At the end of that year, what happens? All your principal is double if you spent the same amount of money, which means the interest is double. If you’re not paying down any principal and you’re in this mode of paying interest, we’re not allowed to do that. Bankruptcy courts are filled with people that do that, except what are they doing? They’re doing what our federal government’s been doing for decades.
It’s lunacy, it’s hypocrisy and there are ways to build a wall around your retirement. There are ways to protect yourselves from future tax rates. If someone is giving you financial advice and they’re telling you because I think it’s a myth, “You’re going to be in a lower tax bracket when you retire.” That’s something that they say to a lot of people. The person who’s giving you that advice, ask them to sign and date that on their letterhead and see if they will. They won’t do it. If they can, I want to take them to the horse track, to the horse races because they’re predicting future tax rates. In the same sentence, I can’t predict future tax rates, but I have enough God-given common sense to look at the national debt and realize the tax rates can’t stay where they are.
Go right back to those four things I mentioned and do simple math: Medicare, Medicaid, Social Security and interest on the federal debt. Add it up and look at more people are going on Medicare, more people are collecting Social Security. More people have gone on Medicaid, although under the current administration, that number has dropped a little bit and then the federal debt is skyrocketing. Did you ever see the actual number when the federal debt spins? It looks like the air conditioner running the electric meter at a movie theater in the summertime down here in the south, it’s flowing.
I’m a very pro-limited government. I want the government in my life as little as possible and that includes my money. Even though the government loves people like my parents, Hollis and June Day, who are both deceased. They are textbook blue-collar worker, parents and the government forced them to pay into Social Security and Medicare their whole lives. They had no choice. I feel bad Uncle Sam gave them the middle finger every paycheck saying, “Hollis and June, we can manage your money better than you, so give it to us. Even though we have a terrible track record of managing money and we spend money and we waste money. We spend money every year. We spend more than we take in, but give us your money and we’re going to pay it back to you later.”
That is lunacy that we have to do that because neither one of my parents, my mother passed away at 54 years old from ovarian cancer. My mother never received a penny from Social Security or Medicare, not a dime. When she passed away, my dad received a check for $255 to pay for her burial expenses. My dad passed away seventeen months later very unexpectedly. My dad was nine years older than my mom. My mom died at 54 and my dad died at 64. My dad never received a penny from Social Security or Medicare. My question is, where’s the money at that they put in all those years? Where’s the money? We didn’t get a check and it was crazy.The beauty of math is math can't lie. Click To Tweet
At least if you buy a piece of land and you start paying on that, or even if you put it under a mattress, at least that’s passed down to your heirs. The government likes people like Hollis and June Day who paid to the system their whole lives and never collected a penny. When I can show someone how to avoid paying taxes on Social Security, if they do some things now, they can never pay a tax on Social Security. First of all, it’s already taxed. Social Security is after-tax dollars. I’m getting a little into detail. We have my friend in the booth with us. He is part of a program that I’m going to let him explain because he’ll do a better job.
We’re all in Louisiana meeting with some people and working on some things. Showing them some ways to protect their money and following the US Tax Code that I don’t think is in the mainstream media. Most typical financial planners and financial advisors are not talking about it. They’d rather put someone in the market with mutual funds and mainly because there’s a fee involved with them. They want to lock them up paying that fee. One had a 2% fee. Tell us a little about what you do and your team of people up there in New York and how it helps us Cajuns down here in Louisiana.
Together, Hollis and I, we promote a brand. It’s to open people’s eyes. The brand is called Bad Uncle Sam. If you want to know a little more about it, you can go to BadUncleSam.com. If you go there, you’ll learn a little bit about what we do. A lot of it is just education. We were sitting with a couple who has done well for themselves. They’re hardworking. I’d consider them to be middle-class. They’ve got a business to sell at some point. Business does well for them and when they sell it, they’ll sell it for a pretty penny. The gentleman’s father and the paternal grandfather also did well, an older gentleman. There’s an inheritance that’s going to show up and these people are genuinely concerned about not necessarily this day’s money. They’re still working and there they’re doing okay for themselves, but in retirement, they’re going to have a couple of generations of money.
They’re concerned about what we talked before, which is future taxes. Bad Uncle Sam and them are coming to us and getting an education on what it looks like to retire. We like to hope for the best and plan for the worst. What we do is we architect for them blueprints. We start with the person’s age. We run them all the way out to their 100th birthday and we put together a blueprint. The way we explained to them, how it’s going to work in the beginning when we meet them, is I introduced myself as an architect and I refer to you as the builder. We use that example of building a dream retirement just as if we would be building a dream house. You need a good foundation, you need a good blueprint, you need some solid individuals who understand that foundation and blueprint and you need to execute a plan. For this particular couple, what we were able to do is show them a plan that when they do receive that inheritance and when they do sell that business and we’re talking ten to fifteen years down the road from now. This couple is in their early ‘50s.
This is what they worked hard for and this is what their parents worked hard for, when they get there, the night and day difference between the plans. We showed them two blueprints. We first show them the before picture. That’s where they are now. They’re not trying to shelter or anything. They’re not applying any of the tax code that is there for them to use. They’re just plugging along. We show them the after picture, which is us taking the knowledge of those different tax code examples that you were reading out of the book in the first segment. Putting a lot of those things into play for them and showing them how to use what our current set of rules is to their advantage. The result was them saving seven figures in taxation, in retirement if they were to live into their ‘90s. Think about those seven figures. They don’t even have seven figures right now, but they’re going to save seven figures in taxes.
We’re not coming up with these strategies on our own. This stuff is in place. We were just following the US current tax code and what the tax code allows us to do. We’re not doing anything special.
Turn on PBS on Sunday afternoon and watch an Ed Slott Show. He’s on every Sunday afternoon on public television. He’s been there for years and he’s out there employing a lot of the same types of programs that we are. The problem is if you’re down here in Louisiana, how do you get hold of Ed Slott? You don’t have to. You call up Hollis and you go to BadUncleSam.com. Ed Slott is not going to come and sit in your living room, but this couple in Baton Rouge, we met and we came down and sat at their kitchen table. We spend a few hours and the architect and the builder put together a blueprint that saves them seven figures.
If you’re wondering if you can be helped, the first segment of the show, we talked about the problem and the lunacy spending. The problem is career bureaucrats and career politicians. That’s another problem and that’s a whole other show as well. There is a big problem with volatility in the market as well. At the same time, we have a solution. We’re not up here just talking about the problem, there’s a solution. If you want to see, if there’s a good fit to get help, call me.
It starts with a conversation with Chuck and doing some fact-finding. Find out, “What do you have? How long do you plan on working?” Its things like that. It’s very simple questions to put together. If you’re a numbers geek like I am, we unravel this blueprint and it’s numbers and columns and rows. It’s cool to see that. I’m not the one putting it all together. Chuck and his team are back in New York and it’s cool to see that. I can see and the people see that. They’re impressed with all the work put in behind it, but the light bulb goes off as well.
I think the key to it all when you experience the Bad Uncle Sam planning and we put together a plan for you. What you start to realize is, it’s just math. You said you’re a numbers geek and I’m a numbers geek, the beauty of math is it can’t lie. It doesn’t. You would think history doesn’t lie but sit in an eighth grade. I’ve got a seventh-grade kid and the history they are teaching now, I don’t even think that stuff happened. They’re rewriting it but in math, you can’t do that. There’s a problem and there’s an answer and that’s the way we treat retirement. The biggest part of it when you start to plug it into math is your average advisor, your average person out there who’s helping people save for retirement, they’re all worried about how much their client has. At the end of the day, the best advice I can give to your audience is it doesn’t matter how much you have in retirement, it’s how much you get to keep.
If someone has $500,000 and someone has worked 25 to 30 years putting money into a 401(k). The company’s matching and let’s say they want to retire five or six years now. Let’s say now they have around $500,000 and their financial guy is managing that $500,000. It is being managed by someone. Let’s call him Joe. If Joe quit work, Joe is not taking home $500,000. Joe has a debt. I say that all the time, his partner in this program is the government. If he’s going to retire fifteen years, they’re going to tell him the taxes. The tax rates are going to be at an unknown rate and unknown date. I’ve heard that one time before too. If he knows in the next couple of years he’s going to retire, we do know the tax code. We do know the tax brackets for the next couple of years.
The Tax Cuts and Jobs Act that was passed in ‘17 and went into play on January 1st of 2018 has a moratorium or sunset. It goes away and it’s written into law. It goes away on December 31st of 2025. Until then, unless somebody writes a new law, we know what it’s going to be. In the future, we’re not sure.Taxes are the greatest impediment to wealth accumulation. Click To Tweet
Let’s say this guy has $500,000 and the best-case scenario of this thing, he’s in a 25% tax bracket. I didn’t make this up on my own. I heard this from someone several years ago and I thought it was a profound statement. He has $500,000 and he’s paying a fee and I’ve seen fees 1%, 1.5%, 2%. I’ve even seen fees a couple of times, a little bit over 2% which is absurd, but I’ve seen that before. The best-case scenario is he’s in a 25% tax bracket. Immediately $500,000, we know that $125,000 is not his. He’s paying someone to manage that money on the $500,000. What we said a fourth of that about $125,000 is not his, but he’s paying someone to manage that money for the government, because it’s the government’s money.
On top of that, what I want your audience to understand is that 2% that he’s paying, that’s annually. That’s not a one-time thing. Every year, that’s what that advisor is getting, it’s 2%.
If you have $500,000, you’re paying someone a fee to manage a fourth of that, that you’re never going to see.
You’re giving them $10,000 a year, by the way, whether they do a good job or bad. Here’s the other thing and I’m not knocking every financial advisor. This is in general. It’s the way the system’s set up. What I want to point out is what you hear is when the markets are great, the guy and gal collecting the 2% fee, they’ll call you right up and tell you how good they’re doing. When the markets go down, when it’s a bad year, a bad market, they still get paid their 2%, even though you lost money in the markets. What happens is the good ones, you’re going to do your review. A lot of them, you’ve got to call them. They’re not calling you. When the markets are down, it’s the market’s fault, “Markets are down 11%. You only lost 8%,” that’s okay. When the markets are up, it’s all credit. My philosophy and the philosophy of the Bad Uncle Sam Program, we build everything off of four main pillars. Number one is safety. Let’s make sure that you don’t lose money.
The closer you get to retirement, the more important that first pillar is of safety. You can’t time the markets. Anyone that tells you they can is lying to you. The very first pillar is safety. Number two is smart tax planning. Keep as much of it as you possibly can. Know the codes, know the rules and make a plan. We focus on flexibility because we don’t know what the future holds. Taxes and markets, we don’t know. The last piece is liquidity to make sure that for good or for bad, you need more money than you’re normally spending on a month to month basis for whatever. Make it a vacation, or you’ve got a leaky roof or if there’s an illness in the family. Regardless of the circumstances, you want to know that you have access to it. Every plan we put together starts with safety, tax efficiency, flexibility and liquidity.
Even that tax efficiency. I do some other things that help people get potentially in a lower tax bracket, get a tax deduction. One of the strategies we’ve been talking about is part of the tax code that very few people know about because it’s not being talked about by the typical traditional financial planners. It’s talking about tax diversification. If you want to learn more about tax diversification and tax efficiency, call me. Let me show you what we’re doing and I’ll show you exactly what I’m doing with my own money. That’s where the rubber hits the road when you go sit down with the mutual fund expert and he wants you to be in a target date mutual fund.
You should be in the mutual fund he’s in. If he tells you, “Mr. Smith, you’re 55 and I’m 35, so you should be in this mutual fund.” I call BS on that because we all want to make money. Give us someone who is eating their home cooking. Chuck, you made a comment when we were talking with someone. I like it because I like math. My kids think I’m weird because I like math. It’s also my moral compass. Math’s either you’re right or wrong. There’s no gray area and that’s the way I’m aligned mentally as well. Tell our audience in case they don’t know what the Rule of 72 is.
The Rule of 72 is a simple math equation that tells you about compounding interest. Whatever you’re making on your money from an interest rate standpoint or if you’re borrowing money and paying and it’s just straight and it works in the other direction as well. If you want to find out how much a loan is going to cost you over time or you want to know how much your money is going to grow, a very simple rule is the Rule of 72. What you do is take the number 72 and divide into it the interest rate. If you’re going to make 4.5% on your money, you divide 4.5 into 72 and you come up with 16. That means that your money will double in sixteen years.
If you’re making a 4.5% compounded interest, your money regardless of how much it started with will be double in sixteen years. Another example is if you’re making 9%, 9 divided into 72 is 8. Their money’s going to double in eight years. It’s a great rule to start to understand compounding interest. It works the other way too. If you’re paying somebody 9% interest and you’re not paying the principal, then your debt will double. If you’re being charged that interest rate and you’re not paying the interest rate, your debt will double. It’s a great little rule of thumb. A couple we were talking to when I bought that up, I watched them take in notes and jotting it down and they thought it was wonderful.
It goes back to math. I firmly believe that taxes are the greatest impediment to wealth accumulation. There is a way to get some of your wealth, what I call off the radar screen of the IRS. When you take money, when you receive the money, the income years from now, there’s no worthy report than on 1040. There’s no magic pill. It takes a little while to get going, but it is not reportable to the IRS because of the way the IRS recognizes the money. I’m not talking about the annuity. There’s a specific strategy that is in the tax code that we follow. That’s why a Roth IRA is not a bad deal either. The bad thing about a Roth, if you make too much money, you can’t put into it. If you can put into it, you can only put $6,500 per year.
That’s part of what’s going on is if there is something good out there, they start to limit what you’re allowed to do with it. Anytime somebody and particularly the government tells you enough of a good thing, you can’t do that anymore. You should look at that thing because that’s probably pretty good. If the government is saying you can do a little bit of it but not too much like the Roth IRA or you make too much money for the Roth IRA. That’s something everybody should be looking into. In this tax environment, if you are saving for retirement and you’re putting it into an IRA, then the word Roth isn’t in front of it and you’re not getting matched by a company, think twice. Call somebody. Call Hollis and let them help you out.
Following current tax code laws and there is a way to what we call backdoor Roth. There’s a little bit more involved in that. A rich man’s Roth, an unlimited Roth, you decide how much you want to put in. To me, it’s based on a 401(k) check. I don’t like anyone telling me what I can and what I can’t do in general and also too, as far as with my money. When you truly think about this, why would someone want to put their money in a 401(k), especially for business owners? I think about this for SEP. Why would you want to put money in something that you can’t touch until you’re 59 and a half? They make you take it out when you’re 70 and a half. I have a lot of people right now who don’t want to take money out of their IRA and they’re over 70, but they have to. In my opinion, the 401(k), is only good for about eleven years. You get nine and a half to seven and a half, it’s the only time you can do what you want with your money.
Pay into it for 50 years, 40 years and are limited to a window of eleven to do with what you want with it.
Let’s say you start working at Entergy, Exxon or Dow or wherever these places and you’re still working at 20, 22, 23 years old. Let’s say you’re 53 and you’ve been working there for 30 years and life happens. Your spouse gets a serious illness or something happens to a child. You need cash and they’re going to pop you on the wrist with a penalty of 10% just to get access to your own money. I understand paying the taxes because you kick the can down the road with those taxes. They slap you on the hand with a 10% penalty to access your own cash is lunacy and we have something better that beats the pants off of a 401(k). Chuck, tell our audience how they can get in touch with us. If they’re in a certain position, why they should look at talking to us.
If you want to engage with Hollis and me together, you can go to www.BadUncleSam.com. When you go to the website, it’s opt-in. There’s a lot of education there. It’s a great little twelve-minute infomercial you can watch. It’s a cartoon and it takes two individuals working at the same place and one of them is following the tax code and our strategies and one of them is plugging money into a 401(k). It shows you over a lifetime how that can affect the two individuals. It’s a great little piece to learn a little bit. After that, you opt-in. You request information from us. You’ll be contacted by my team. You’ll meet with Hollis and me. We’ll find out a little bit about you in a really straightforward approach.
We have Chuck Omphalius. You did a great job. Thank you for being a guest on the show. Call me 202-SAGE, that’s 202-7243. You can go to the website, SageMoneyRadio.com. You can send me an email from there. Thank you. God bless you. God bless the USA.
About Chuck Omphalius
Senior management experience and highly developed talents in tax smart retirement planning, new business development, strategic alliance building, client satisfaction and multi-account management.
Tax Smart Retirement Strategies
Reaching “The Power of Zero” taxation
Social Security Planning
Special Needs Planning