February 9, 2019

Don’t Let The Lunacy In DC Put Your Future At Risk

SMR 17 | Building Wealth Through Tax

 

With the huge taxes draining us of our money, making the most out of the money we have left is everyone’s goal. Aside from the strategy to increase sales and reduce cost, another thing to achieve this is by making money out of your tax. Learn about different applications that can help you build wealth despite all these unimaginable taxes everywhere.

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Don’t Let The Lunacy In DC Put Your Future At Risk

The older I get, I am grateful and thankful to be a citizen of this country even though we do have some total lunatics in this country. We have some lunacy going on in Congress. There’s probably always been lunacy going on in Congress, but now it’s much quicker to get access. Imagine if you had a total idiot, moron, buffoon with the mind of a two-year-old like the lady from New York. I don’t want to say her name. If you had those 50 years ago, you’d have to read about it in the paper probably two or three days later. Now, we get to hear the things that she says within minutes of her saying them. The whole Green deal and all, all this goes back to a lot of the things I’ve been saying here for years. It’s not original. I’ve learned a lot of this stuff. I give a lot of credit to Tom Loff and his son, Matt, some people that I’ve been affiliated with, some smart people. Bryan Bloom, they’ve all been guests on the show about taxes. We can see what they think and how they believe in money. I don’t care if a person makes $10 million a day. In my opinion, they should not be exposed to a 70% tax.

I know the whole portion is not 70% tax. It doesn’t matter. It’s lunacy. Why in the world would anybody want to give more money to the government when the government has proven over and over again that they are terrible? They suck at managing money. They’re terrible. It’s a lot of waste. I want to give the government the least amount of my money as possible. I’m a little extreme, but I like doing business with people that believe what I believe. If you’re reading and you think we don’t pay higher, you don’t think our tax rates are higher enough, don’t call me. Put your money where your mouth is and write an extra check to the Department of Treasury. They’re not going to turn away your donation. Our government is too big. We never hear about cutting budgets. Why don’t we ever hear that? If the money’s not there, you can’t spend it. A lot of the languages I’ve been using for the last couple of years, the chickens are coming home to roost with these idiots. They want to keep their hands in our pockets. I want Uncle Sam out of my pockets. I want Uncle Sam out of my life. If you believe that, then we should have a conversation. I’ll show you exactly what I’m doing with my own money and you’ll like it.

The way businesses are run, there are basically two ways to be successful in business. You either make more sales. If you keep the sales the same, you could reduce cost. How do you increase sales? How do you reduce costs? I’ve learned this. This is not the original language. I’ve been around some smart people and I’ve written down some phrases that they’ve said. I’m going to come up with a couple of phrases on my own, but you don’t need a retirement plan to retire. You need money. Where you keep your money is more important than the actual rate of return. Do you comprehend that? Think about this in business, we have overhead. Let’s say I do $500,000 in sales, but it cost me $450,000 to get to that $500,000. That’s not successful. I’m only making $50,000 a year in profit compared to a business that does $250,000 in sales that only took me $100,000 to get there. That’s what we call the growth trap. How do you get more revenue? How do you do that? You can drive expenses and the subsequent dollar is much more expensive than some of the lower dollars. The growth trap, once you’re in it, it’s tough to get out of. The way retirement plans work and the way the stock market is, it can be a problem.

I’m having a blast doing what I do. I love meeting new people, showing them and the majority of people’s wealth I meet or 401(k)s, IRAs, SEPs, SIMPLE IRAs, any type of qualified retirement account. There’s around $25 trillion in all the accounts in the nation, give or take a little bit. Do you realize that’s more than national debt? This $25 trillion is pretax. If everyone in the country took money out of their retirement account, not even counting the penalty if you’re under the age of 59-and-a-half, 40% of that money goes to the IRS when you account for the federal tax, state tax, Obamacare tax, healthcare taxes, local taxes with the city. 40% belongs to the government. You have the demonic, sick-in-the-head lunatic Nancy Pelosi. She’s quoted a saying that the money in your retirement account is not yours. It’s hers. Its pre-tax dollars. There’s $20 trillion in debt. There’s over $20 trillion in retirement accounts. Do you think they’re tracking that? They are because when that money becomes liquid, who gets paid first? IRS does.

There are many things that you can do with your money not running it through Wall Street that you don’t have access to if you’re going to your traditional financial planner or broker. I’m not saying that because I’m wealthy. I’ve been fortunate to be blessed to know some wealthy people. I have asked them, “What are you doing with your money?” I scale it down to my income and my wife’s income. My wife’s a teacher at a private school. She didn’t make a lot of money. We’ve got to have her own retirement account. I’ve been fortunate to scale back what they’re doing to my income. Call me at 202-SAGE. That’s 202-7243. You can send me an email. Go to the website SageMoneyRadio.com. You can send me an email from there.

Our government is too big for more taxes. What the government need is to cut budgets. Click To Tweet

Financial advisors probably, I’m not beating up on them, it’s the way the system is. They love your IRA. They love your 401(k) probably more than you do. When you put money into an IRA, you don’t get a tax deduction. It’s not a tactic. It’s more of tax deferral. It’s a tax postponement, but that doesn’t sound good as a deferral. I encourage you to get educated about other strategies that we go through Wall Street. The traditional financial advisors, we talk about retirement and whatever that age is for you 60, 65, 70. My father-in-law is a CPA. He’s still working. He’s 72. What is retirement? Is it an event? Is it a misconception? I say this all the time. I have a couple of clients that are retirees. They are not in a lower tax bracket. If someone’s giving you financial advice and they’re telling you that you’re going to be in a lower tax bracket when you retire, run.

Number one, probably because I think they can predict the future, which is impossible because they’re telling you what tax bracket you’re going to be when you retire. Nobody knows what their future tax brackets are going to be. We know the ones we have will expire in 2025. They’ve been passing the law. That’s why I’ve been saying taxes are on sale. I doubt a CPA would tell you this, maybe a financial planner, financial advisor. They say, “You’re going to be in a lower tax bracket when you retire.” See if they will sign and date that on their letterhead. I bet they won’t do it. They don’t know the future tax rates. Plus, why would you want to live on less income? A lot of people may have to and some will but some won’t. It’s not a cookie cutter approach. What if I said, “I’m going to show you how to retire? It’s going to be great. You just got to live on half.” What advice would that be? What suggestion would that be? The truth is if you run a business, you can control some things and some things you can’t. You can’t control sales. You can influence them, but you can’t control them. I can’t control how much I pay for rent to an extent. I could go find the cheap rent district. That’s a little story from my friend Matt Loff.

There are ramifications in the financial planning world. It’s simple to control a certain few aspects. It comes down to three main things that we could control. Asset management fees, market fluctuation and taxation. Did you know that the income tax is the only tax that’s required on the dollar that you make? What you make an income is taxable. What you do with your dollar after you pay your income tax will determine how many taxes you pay going forward. Ask yourself, “Are you working with a CPA that does tax returns or are you working with a CPA that does tax planning?” Tax planning is much different. They understand the ramifications of taking money out. You don’t need a retirement plan to retire, you need money. Where your money sits is more important than the rate of return.

SMR 17 | Building Wealth Through Tax

Building Wealth Through Tax: You don’t need a retirement plan to retire. You need money, and where you keep your money is more important than the actual rate of return.

 

Let’s say you have $1 million in your 401(k). A lot of people think that’s successful and I would argue that is a good thing. We’re talking about a good problem here, but you’ve got to ask your advisor one question, “How much is mine of that $1 million? What’s the answer?” If you say the whole thing, if you take it out, see what happens. That $1 million if you go take it out, how much will you put in your bank account? It’s not all yours. Think of the taxes that we have here. We have the federal income tax, the payroll tax, the corporate tax, the estate tax, the gift tax, the sales tax, inheritance tax, the property tax, the import tax, the state income tax, the death tax, capital gains tax, excise tax, home improvement tax, gas tax, school tax, even tax on our pets. In New Jersey, if you’re bored, go to Google.com and type in, “New Jersey rain tax.” Can you believe that? They’re going to tax people by the square footage of their driveway because rain hits the driveway and washes the toxins down the drain and they want you to start paying for that. That’s lunacy.

Within 2018 I’ve been getting more vocal on this because I am not a registered Republican or Democrat because I do think both parties are corrupt to the core. The far left, they’re demonic evil people. The way they talk about taxes is theft. Talking about killing babies a day before they were born. It’s lunacy. I can’t deal with that. I’m in a little Bible study every Wednesday morning with a couple of friends and it’s intense. There is a lot of accountability there. In the end, we were talking after we were done. I said in my group of people, I don’t think I have anyone who believes that. I’m convicted in my belief that if I know someone who believes that’s okay, I don’t want to be associated with them. I don’t want to be friends with them. My circle of trust is small, but it’s crazy. The same people who believe that they want us to pay more in taxes. It’s $1 million. You pay this tax when you take it out. You’re lucky. Let’s call it 30% to 40%. If you have $1 million, you pay 40% in taxes. You might get to keep $600,000. It’s a much different number than a million. It’s significant.

There are not many better things in life than a hot Krispy Kreme donut. Click To Tweet

Do you know why your advisors and all these big companies love these financial institutions that qualify retirement accounts? It’s big numbers under management. They charge a fee on your account value, the portion that is yours and the portion that you have to give to the IRS. You take out $1 million now. $400,000 goes to the government. $600,000 goes to your bank account. These are round numbers here, ballpark figures. However, if you kept the $1 million in the account, does the IRS send you a check to help pay for the asset manager’s fee to manage that account? You’re paying a fee on money that you’re never going to receive. When I heard a friend Tom Loff say that a couple of years ago, I was like, “That’s profound.” I couldn’t get back to the radio station and say that on the radio. You have $500,000 in your account. How much of that is yours? Let’s say you take out a little bit every year. If you go take it out at one time, you’re going to be taxed at 40% roughly or 37.6% whatever. It’s roughly 40%. If you take out a little bit over time, let’s say you have 25% tax bracket. You’ve got $500,000 in there and 25% tax bracket is $125,000. You’re paying a fee on the $500,000, but a fourth of that you’re never going to get. You’re paying a fee for money to be managed that you’re never going to receive. Regardless if it goes up or down, you pay the fee on your assets and the part that belonged to the IRS.

You’re taking a risk and I’m sure your advisor had you take a risk assessment based on how much risk is appropriate for you, which is asset allocation. It’s almost a joke. 85% of asset managers don’t even beat the index when it comes to investing. They do these risk assessment tests for people to make the client feel good like they’re going through, “Honey, they really care. They’re going to see what risk.” All they’re saying is how much of your wealth are you willing to lose? If you lost a lot, would you care? “We’ll put you in a smaller risk environment.” You need a plan according to the advisor that you’re going to pay a fee for the rest of your life. You’re going to pay a fee on money that you’re never going to receive. That’s their plan. Does that bother you? That bothers me and I’m not you, but it’s the way that the system’s set up. I always say, “I like to swim upstream in doing things differently.” Institutions want advisors to be in sales. I’m not an advisor. I’m not a traditional stockbroker. For the oil and gas company, I’m a Saturday employee for them. I have another strategy where I get paid a little bit different and I go with that with people. They want advisors to be in sales. They sell widgets, institutions, banks, these big companies on Wall Street. They make widgets for people to buy, which they call a retirement plan.

You want to retire, put your money in a retirement account. We’ll charge you a fee for the rest of your life, whether it goes up or down. I’m going to get paid. I’ll never show you how to spend it, but I will disclose how I’m charging you a 1% fee. No advisor in the country is required by law to teach anyone how the distributions work of their retirement plan because the government doesn’t want them to know that 40% of your account belongs to the IRS. They want you to focus on the 1% management fee that you might be losing. These are round numbers. These are good problems to have. If you have a $1 million in a 401(k), that’s great. You’re talking about extremely inefficient ways to not only spend wealth but pass wealth on because you’re basically postponing the tax bill. A lot of people, I learned this from my friend Matt Loff. Your money in the 401(k) plan, people will say they hate debt, but the debt in your 401(k) that’s unpaid to the IRS, that’s real debt because you owe to the IRS. If you’re 40 or 50 and you plan on retiring at 65, that’s fifteen or 25 years away respectively. You don’t know how much you owe to the IRS because we don’t know what the tax brackets are going to be.

SMR 17 | Building Wealth Through Tax

Building Wealth Through Tax: When you put money into an IRA, you don’t get a tax deduction. It’s more of a tax deferral.

 

People are worried about paying fewer taxes in 2019. I firmly believe we’re in some of the lowest tax brackets we’ve ever had in the country. I believe that because it’s true. I’m a math guy. I like numbers. The numbers don’t lie. We’re in some of the lowest tax brackets ever in the history of our country. Why would you want to defer the tax down the road? Why would you want to kick the can down the road? Would you rather pay taxes on the harvest of the seed? Let’s say you’re at the co-op and you have some okra seed. The cashier says, “Mr. Day, you can pay the taxes now on the seed or you can pay the taxes when you harvest it all. What would you rather do? To me, it’s a no brainer to pay the taxes now. If you have a lot of money in a 401(k) or an IRA, there’s a way to get it out and avoid the 10% penalty. There is a way. I encourage you to quit kicking the can down the road. Deal with the tax now where you know what you’re paying. You don’t know what you’re going to pay many years from now.

I’ll share a happy story with you. I was with my daughter in Zachary doing a little track practice at Zachary High. On the way back home to BR I said, “Katey, I’ll take you somewhere for a little surprise.” She was like, “Dad, where are we going?” I said, “I’ll surprise you.” I took her to Krispy Kreme Doughnuts on Plank Road. I had an aunt who lived three blocks or four blocks behind there when I was a young kid. This was the early ‘80s. I can remember walking to Krispy Kreme quite often with her and my grandmother. We walked in there and when I saw that glaze coming out hitting those hot doughnuts. Katey bought a Lemon Filled and we bought a dozen Glazed Doughnuts. They took them out with the glaze still coming on them. We were first in line. Within three minutes I’m back in the truck and my daughters had plenty of Krispy Kreme Doughnuts but they bought at a gas station. She’s never had a hot one. She’s got a sweet tooth like me and her old pawpaw. We opened the boxes and she was like, “Dad, the box is hot.” I was like, “I know, taste one.” She took a bite and she goes, “Dad, it’s melted in my mouth.” I said, “I know. Isn’t it awesome?” There are not many better things in life than a hot Krispy Kreme doughnut. I ate one, Katey ate two. We go home. My two boys ate the other nine. They ate them within two minutes. My wife was like, “You all are grossing me out. No one’s going to take the food from you. Enjoy the doughnut.”

To be successful in business, either make more sales or reduce cost. Click To Tweet

I grew up right there in Port Allen right across the old Mississippi River Bridge. We were right there on Plank Road all the time. We did probably 80% of our grocery shopping at Delmont Village when I was a kid, that Piggly Wiggly. Times have changed for sure over there. I have all these great memories going over there. I used to hit that Howard Brothers right there at Plank and Airline. I remember going to that K&B right there in front of the old Robert E. Lee Theater. I can remember going to that K&B and they had the little automatic doors when you go in and would open up. They had the best eggnog ice cream in the world. Talking about deductions or deferrals, as a business owner, an example of a deduction will be a business expense. You can deduct the business expense from your income or the mortgage interest on your house. Chances are you could probably deduct that interest, meaning you’ll never owe that back to the government. When you put money into a qualified plan, you’re basically deferring your tax bill, you’re not deducting it.

There’s a difference there. You deduct it off that year’s income, but it’s going to show up whenever you take the money out. Going back to what the advisor is going to charge you, a fee on that full amount, the part that goes to the IRS and the part that goes to you. When you pull that out, you’re going to have the income tax, but we don’t know the income tax bracket in which we’re going to be in at that time. We don’t know that now. Historically, we are in some of the lowest tax brackets we’re ever going to see. Do you think taxes are going to be higher or lower in the future? If you think taxes are going to be lower in the future, you should be maxing out your 401(k). Most of our audience believe taxes are going to be higher. Why are you maxing out your 401(k)? If I had a friend, I would say, “Why don’t you contribute to your 401(k) the minimal amount to get the match. If you’re open minded, call me and I’ll show you another plan. I know a place to put that money. The White House-Congress, it all flip-flops. That pendulum swings into me. It’s swinging more to the left, more to the right. The lunatic left side, they love high taxes and they know how much money is in qualified plans.

Let’s talk about the IRS. Do you think they’re going to spend less or they’re going to increase revenue, raise taxes? Where are we going to be? Even Trump’s plan, which we did get a deduction. It wasn’t a home run, but it was something less. It’s better than nothing. That goes away. January 1st, 2025. It’s done. It’s over with. Maybe before then if these people get what they want, they want to repeal that. They think it was a tax break for the ultra-wealthy. I have a bunch of friends and every one of them is a little bit more in our pocket. I’m not ultra-wealthy. I’m not even wealthy. I’m wealthy if you look at my wife and my kids and my happiness, I’m full of wealth. As for money, I’m not a wealthy person. My wife, the first paycheck, we got more so we were happy. Anytime I can pay a penny less to the government, I’m happy. We’re in a low tax bracket historically speaking. Look up the history of the tax code and see the old tax brackets.

SMR 17 | Building Wealth Through Tax

Building Wealth Through Tax: You don’t know how much you owe to the IRS because we don’t know what the tax brackets are going to be.

 

When Ronald Reagan was making movies, he got paid $100,000 a movie back in the early ‘40s or mid-‘40s. After that, 94% went to the federal government. 6% went to the State of California. He quit making movies. Why would he make movies when everything above $200,000 would go to the government? He quit doing that. Whenever he got elected, you can see how he lowered the tax brackets or he lowered the tax rates. That was basically his personal example of what happened. I like to talk about the distribution side of the money. There is a nice tax deduction when you invest money, when you invest cash in oil wells. I’m talking about the potential of future tax rates that nobody knows. If you’re getting financial advice from someone and they’re telling you that you’re going to be a lower tax bracket when you retire, run. First, before you run, ask them to sign and date it and put it on their letterhead that you will be in a lower tax bracket when you retire. They’re not going to do it because they don’t know the future tax rates.

When you look at all your money in a 401(k), you’re contributing to an account. Especially if you’re younger, it means if you’re a few years away from wanting to retire. Even then you want to live off that money. You can’t even calculate how much is yours. The 401(k)s, this government-sponsored program and your partner is the government. We want to spend money. Why are we calculating the accumulation, not calculating the distribution? How much can I spin off this asset with a 401(k), my SEP, whatever? When it comes to the deferral, the deduction conversation, if you’re working with the advisor you’ve got to ask him, “As a business owner, what you’re setting up when you put money into an IRA or qualified retirement account, you get the deduction from the business to put money into that account or my income, whatever.”

The financial planning world is very simple to control. Click To Tweet

If it’s a business owner, I would get a deduction from the business. If it’s an expense for the business, you’re setting up a taxable event for the employee or yourself in the retirement account. Why don’t you ask the advisor, “How do I get an expense in the business so I can still deduct it, not defer it? Deduct it from the business and set up a tax-free account so that when I take my money out, I’ll never pay taxes again.” That’s possible. It’s exactly what I’m doing. When I sit down with people, I show them exactly what I’m doing with my own money. In the financial world, there are basically three ways to reduce costs. You can reduce your asset management fees. You still have a fee to manage on the Roth. You can reduce market volatility. That’s two of them right there. If the stock market goes down, the value of your account goes down. Keeping up with the market, all the gains in 2018 were wiped out at the end. It all comes down to taxes. Do you believe taxes are going to be higher or lower in the future? The current tax code has 86,000 pages. As business owners, as hardworking citizens of this country, you have to take advantage of smart decisions.

I lost money in the 401(k) back in 2001 and it wasn’t because of the advisor I had. I was in a group working for a company, but I was angry. I had no control over it. I like to control my money. I’ve learned some things over the years and I’m a control freak with money. When banks lend money, they’re not using their money. They’re using other people’s money. I’ve said this for years. You put $100,000 in the bank. I did see a 2.5%, two-year CD in a billboard here in Baton Rouge. We’re going to pay you 2.5% of your $100,000 in a CD. Then Hollis walks in the bank the next week and I want to go build a house. They’re going to charge me whatever interest rates are, 4.8%, 5%. They’re keeping the spread. If I put my money in a bank at 1%, they’re going to pay me at 1%. Let’s say you put in $10,000, they’re going to pay me 1%. You take a $10,000 loan. They’re going to charge you 2%. What’s the bank’s rate of return? You would think 1%, but it’s not. It’s 100%. They paid $1 to have my money deposited and they’re charging you $2 to take it.

That’s a 100% rate of return. They’re having rates of returns in the five figures for some accounts. These are the same banks that got bailed out by the government. There is no such thing as a government bailout. It’s a taxpayer bailout. The taxpayers fund the government. The banks that make thousands of percentage of rates of return, they’re practicing principals that they don’t even teach us. They got bought out by our tax dollars and then we have to get approved to get our money back through another loan and they’re still making massive rates of return. It’s a joke. Learn about alternative ways to make money. Let your money make money, not running through Wall Street. The banks use other people’s money to make money. I have a checking account, but I don’t use the bank to invest my money. Wall Street’s a game and a lot of people don’t know the rules of the game. Be careful with what you put your money in. You don’t know what you don’t know and I can show you some things that I’m doing. I don’t have the answers to everything. I don’t have the answers to all the questions. I have a couple of strategies that I use and I believe in that one is going to get some of your wealth off the radar screen of IRS forever. One can’t help you with a current tax deduction now. You learn about it.

SMR 17 | Building Wealth Through Tax

Building Wealth Through Tax: If someone’s giving you financial advice and they’re telling you that you are going to be in a lower tax bracket when you retire, run.

 

One of the things that I worked with a guy on is amazing. There are probably not many people talking about this in Baton Rouge. It’s an In-Marriage QDRO. It’s a way to access your retirement asset without paying a penalty or restricted. Let’s say you’re 52 years old and you have $1 million in an account at your work. If you want to access that money, you’re going to pay a 10% penalty because you’re going to access it before you’re the age of 59-and-a-half. You pay the taxes on it. If you want to access your money and avoid the 10% penalty, call me. You pay a flat fee to an attorney, $5,000 and she goes through the ERISA Laws and gets your money back to you from your employer. You owe the taxes on that money. Let’s say you have $500,000 in an account. If you want to get that $500,000 out of your IRA or 401(k) and you’re 50 years old, 45. You’re going to pay $50,000 and a 10% penalty or you could pay $5,000 to this attorney. It’s going to take roughly 60 days or so, give or take a couple of weeks to avoid the 10% penalty. It’s called an In-Marriage QDRO.

Diversifying Investments

I’m reading from the literature here. Application one, diversify investments ahead of the stock market downturn. The market has been on an eight-year bull run. How fast can a working individual who looks at their 401(k) statement once per quarter react to a correction or crash? George is 56 years old and has $625,000 in his 401(k). His wife, Peggy, is also 56 years old. Both are starting to think about retirement but cannot do so. George fears that the stock market will not continue going up and fears that another stock market correction will cause his 401(k) to lose significant value before he is able to retire and roll over into a more diversified portfolio. In-Marriage QDRO would allow George to take $300,000 from his 401(k) and roll it into an IRA in Peggy’s name. With the proper guidance from a financial consultant, Peggy can diversify this $300,000 in various stable accounts which protect against a stock market correction. Meanwhile, George keeps his $325,000 in his 401(k), which allows for the chance of continued growth in the stock market while also continuing to contribute for another few years before he retires. You can take the whole thing out or you can take a little bit out.

You can't control sales. You can influence them, but you can't control them. Click To Tweet

Another example of rolling funds is the younger spouse to delay required minimum distributions or RMDs. John is a 68-year-old employee with a $595,000 401(k). John is married to Susan, who is 57 years old with a good income. John and Susan have little debt, live a modest lifestyle and are both in good health. John is fast approaching the age where he must begin withdrawing a mandatory distribution from his 401(k). John would prefer to keep these funds in a qualified investment earning a good rate of return. The In-Marriage QDRO allows John to transfer funds to Susan who will not be under the same mandatory distributions for another thirteen years, which allows the funds to grow for many more years pre-tax. That’s an example, but it goes against what I believe in the tax rates. Additionally, depending on the amount transferred, it could also be a way to put John’s estate under $8 million for tax estate planning should he be near that threshold.

Rolling Fund To The Other Spouse

Application number three, rolling funds to the older spouse so we access funds at an earlier time. Application number four, the wealthier spouse has a prenuptial agreement and files married but separate tax returns, but still want to provide security for the less-wealthy spouse. Application number five, avoid normal in-service distribution rules by clinically removing after-tax funds from the 401(k). Employees want to do an in-service distribution, but only once you withdraw the after-tax portion of his 401(k). The family wants to put a down payment on a home. However, the plan says that the in-service distribution rules require that the liquidation of certain pre-tax funds before accessing the after-tax portion. In-Marriage QDRO disallows John the employee to select precisely which portion of the 401(k) he would like to remove, including withdrawal of the after-tax portion without disturbing the pre-tax portion. If the non-employee spouse is under 59-and-a-half, then the parties can liquidate the funds without the 10% early withdrawal penalty.

Prenuptial Agreement

Application number six, turn 401(k) funds into a guaranteed pension and this is talking about putting the money into some type of annuity. I’ve never sold an annuity. I’m cautious with them because a lot of them have bells and whistles and a lot of annuities are advertised for this phantom money. Be skeptical of the bonuses. It’s phantom money and some of them is fake money. It’s not real. It’s like fake news. It’s not real. It’s false. Some it is. I’ve seen both. Make sure that you have a guy that you’re working with who knows about annuities and he’s not selling you fake money or fake bonus into an annuity. Application number seven, utilize 401(k) to buy property or other alternative investments. We have a winner.

Removing After-Tax Funds From The 401(k)

If one of the spouses is familiar with the real estate market or in construction, can effectively manage rental properties or flip a house. An In-Marriage QDRO which allows funds from a 401(k) to be transferred into a self-directed IRA, which can, in turn, purchase real estate instead of securities. Additionally, it is believed those alternative investments like buying a gold IRA or buying fractional pieces of companies that purchase bad debt for a profit. An In-Marriage QDRO allows these types of purchase to be funded from a 401(k) to a self-directed IRA rollover. There are many things out there than what your traditional financial planner broker wants you to know about. Those guys are married to the stock market. I’ve seen them get mad when people take some of their own money out of the accounts. It’s human nature. You’re pulling bread off the table for them. Application number eight, one spouse wants to retire from state employment early. Peggy is a state employee with a LASERS pension. She is 50 years old and has been working with the state for 24-and-a-half years.

Peggy would like to retire soon but cannot because she doesn’t have 30 years of service and is not aged 55. She’s married to Jim, who has a 401(k) with $375,000. Peggy has a deferred compensation plan that she only contributes $50 a month because the state doesn’t match contributions like Jim’s 401(k). An In-Marriage QDRO would allow Jim to transfer funds from his 401(k) to Peggy’s deferred compensation plan or regular IRA. This would allow Peggy to purchase five years of airtime service, which puts Peggy at 29 years of service. At 30 years of service, Peggy can retire with full state retirement at any age. The cost of airtime service can be expensive so the guidance from a good financial consultant is necessary to determine if such an investment is wise. However, this process gives Peggy options that she didn’t have before. If you have money trapped in a 401(k) or IRA, there’s a way to avoid the 10% penalty. It may or may not be a good fit for you.

Learn what alternative strategies are out there besides the traditional stocks, bonds, mutual funds, CDs, annuities. There’s more to life than that. There’s more to life than what Wall Street wants you to know about your money. The way the government has the debt and the way the radical left lunatics are talking about taxes, to me it’s almost funny. The fact that they publicly say this, I’m thinking, “Does that person know how stupid they sound?” It baffles me. I shouldn’t be shocked anymore because I shouldn’t be, but I still am because I’m such a limited government proponent. I firmly believe our government’s too big. I do believe in government. We need a military. We need government. There’s no doubt, but it’s too big. I believe we have way too many federal employees. Most businesses when things get tough, they have to cut. People get laid off and I hate that. You don’t ever hear about the size of government decreasing.

I want control of my money. I don’t want to have to wait until I’m 59-and-a-half to access my money if I need it. I’m putting money away for retirement. If life were to happen, I don’t want to wait. I’m going to go get my money and the 401(k) handcuffs you on that. It’s a terrible place to put money. I firmly believe in that. I know people make money, but it’s volatile. There are other ways to put money in there. I definitely think you should reconsider if you’re overfunding your 401(k) or if you’re putting in more than the match. If you’re open-minded, call me because you could decrease what you’re putting in. Put in the minimum amount, make a contribution every paycheck. The minimum amount to get the match. The match is called free money, but I could argue that but I won’t. If you’re open-minded, call me. Let me show you how to get some of your wealth off the radar screen of IRS. I can probably show you a way to retire on a third of what you think you need, a third because of where your money sits. Call me 202-SAGE. That’s 202-7243. The website is SageMoneyRadio.com. You can send me an email from there.

 

 

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