January 12, 2019

How To Keep Uncle Sam Out Of Your Life Savings with Chuck Omphalius

SMR 13 | Bad Uncle Sam


Everything starts with education, and that’s what financial architect Chuck Omphalius is doing with the Bad Uncle Sam program. Chuck explains that Bad Uncle Sam is about helping people to live with the least amount of taxes paid when they reach their retirement years. Discover how you can protect yourself and your family’s life savings from market risk and future tax increases and Chuck dishes out some good planning advice and long-term, guaranteed, secure, life strategies.

Listen to the podcast here:

How To Keep Uncle Sam Out Of Your Life Savings with Chuck Omphalius

I have a great show lined up mainly because I have my good friend, colleague, Chuck Omphalius. Chuck, welcome to the show.

Hollis, thanks for having me.

Chuck is from the Northeast. He’s from New York and Chuck is with the Bad Uncle Sam Program that I’m affiliated with. Why don’t you tell our audience a little bit about yourself and the journey to where you are now?

I’m a lot like yourself. I’m a family guy. I’ve got three kids, two older from my wife, Kim’s first marriage, Alicia and Daniel. Alicia’s about to give us our third grandchild. Daniel’s given us two already. My youngest, Max, is twelve years old. We adopted him from Russia when he was two. Just like you, the family’s important. It’s why we work every day and pay the bills.

Why don’t you tell our audience a little bit about the Bad Uncle Sam program and what we do for people? Maybe how that journey started with Bad Uncle Sam.

A lot of people hear Bad Uncle Sam and it comes across with the message you were talking about, our soldiers and in this great country we live in. It’s not about bashing America, I promise you that much. Bad Uncle Sam, we’re talking about the IRS. I’m a veteran of the US military. I was an infantry soldier for four years. That’s how I paid for college. I’m as patriotic as they come. The Bad Uncle Sam program is about helping people to live with the least amount of taxes paid when they reach their retirement years.

I’ve always said on this show and not to be cocky or pompous because I like doing business with people that believe what I believe. If you don’t think we’re paying enough in taxes, don’t call me because you’re probably not going to hit it off from day one. If someone wants to pay more in taxes, then I’m sure the US Treasury will not decline a donation. It’s about education. You guys educate.

All we do is educate. Everything starts with education. You and I worked down here with a couple who is very heavily in real estate in the Louisiana area and some other parts of the country. We were down here talking about the real estate empire that they built, which would provide them with tremendous income in their retirement years, how all of that that they built, there are certain parts of it that are going to adversely affect them in their retirement tax-wise. We gave them some good planning advice on how to divest from some of it, where to keep some of it and how to plan it so that when they do stop working and retire, they’re not giving so much back to Uncle Sam.

This has been hours and hours of phone calls and I went and met with you and then you flew down here doing some fact-finding. Finding about the real estate, what’s going on and how we work to help them because I’ve learned a lot about this. A charitable remainder trust, how to get involved and it’s good for the audience to hear a little about the real estate.

Essentially, about half of their real estate holdings and they are seven-figure real estate holdings, twenty-plus properties, is inside Roth IRAs and the other half are normal real estate generating income. We were able to show them that the income generated that isn’t Roth income is going to cost taxation on their Social Security. A lot of people don’t understand that. You mentioned the charitable remainder trust where we use that as a way to be a little philanthropic. They’re going to give a nice chunk of change to a charity of their choice.

They were a lot different. They have no children.

Family's important. It's why we work every day and pay our bills. Click To Tweet

There’s some charitable work that they want to do. They’ve got an excise tax write-off in the upfront for the charitable work. What we’re doing is taking all the property that’s not Roth and dropping it into the charitable remainder trust. Over the course of time, we will divest from that property, sell off the property, create cash, and liquidate. You can’t just unfold taxes. They don’t go away. We’ll spread out the capital gains but the goal is to get them to what we refer to as the power of zero. What that means is we can pick a date in the future. It does take time. It doesn’t happen overnight but we pick a date in the future. We do extensive planning to get them to the point where all of their assets and all of the income driven by those assets comes to them in a form that doesn’t show up on their tax return. That’s probably the simplest way to summarize it.

I am affiliated with another oil and gas company in Texas. I love the tax deduction that oil and gas investment give. I love the tax-free income that the strategy that you and I employ with people. The tax-free strategies are what we call an overfunded Roth or a Roth on steroids. You said the upfront tax deduction they’re going to get, dive into that a little bit more going into the charity remainder trust.

I’m going to use round numbers. I’m not going to use the numbers from the clients here. I don’t think that’s appropriate. If you were to put $2 million worth of real estate into a charitable remainder trust, what happens is the government allows you to take 10% of that and give it to a charity. In fact, you can give as much of it as you want. In order for it to work properly for our program, you have to leave 10% in the trust that actually goes to the charity. In this case, if you put $2 million real estate in the trust then they’re going to get a $200,000 tax write-off of in the first year. The owners of the real estate or the trustees have complete control. It’s their property. A lot of people don’t know what trusts are. People are nervous about trust. I’ve got a great way of explaining trust to people. IRS does not know your name. They know you by a nine-digit number. You’ve got three numbers, a dash, two numbers, a dash, and then four numbers after that. That’s your Social Security number. You are a living taxpayer.

The IRS also recognizes nonliving taxpayers and they have nine-digit numbers as well. They’re called EINs or Employee Identification Numbers and that’s two numbers, a dash with seven following. That’s so that the IRS can recognize on site whether they’re dealing with a living or a nonliving person, where the dashes are in the nine digits. What is a nonliving taxpayer? An LLC, subchapter S, C corp, partnership, sole proprietorship, or a trust. It is an entity that the IRS collects taxes from. When we set up a charitable remainder trust, the remainder part of it is what goes to the charity in this case 10% of our example, $200,000. What we do is we liquidate the property. We do it over time. Depending on the amount of time that you want to take an income from the trust, the IRS has rules of what percentage of income you have to take.

If you were to do it over a five-year period, the IRS is going to make you take less than 40% every year out and you have to leave at least 10% in at the end. You put $2 million in, you take out about a little less than $800,000 in year one. You’ve got to sell the real estate right and the trust, liquidated at least enough to generate the first $800,000 payment. You take that out. You’re not getting away from the government. You’ve got to pay capital gains tax on that. We go through the strenuous work of figuring out basis and depreciation, what’s being owed and recaptured depreciation and all the things that go into the planning tax-wise. You’ve got $1.2 million left of real estate but your trust can generate income while you’re in there. Whether it is cash or real estate, it can still earn interest, it can take rent, it will earn. As the trust earns and it’s growing inside the cash, inside the real estate, the asset, and the entity, as the asset is growing, the trust value is growing. Over the course of time, you continue to take out that number leveled below 40% until there’s nothing left but the remainder what you’re going to give the charity, the $200,000.

Hence the name charitable remainder.

SMR 13 | Bad Uncle Sam

Bad Uncle Sam: Depending on the amount of time you want to take an income from the trust, the IRS has rules of what percentage of income you have to take.


What we’re able to do usually is spread it out over enough time and then make enough income or interest off of the asset inside the entity or the trust, where you’re putting $2 million. You’re taking out more than $2 million, you’re leaving $200,000 to a worthy charity. You’re getting a write-off upfront, you’re spreading out the gains, you’re picking a date and time where we can reach that almighty power of zero.

I am a fan of the Roth. We talked about Roth. It goes back to personal beliefs. When you look at the history of the US tax code, people question me when I say this because they don’t look at the history the tax code. For the most part, we’re in some very low tax rate compared to the history of the tax code.

It’s actually the lowest since 1913 when the very first tax was levied, permanent tax. There was a tax levied back. Lincoln put a 2% flat tax in to pay for the war. That went away when the war ended and in 1913 was the very first tax ever levied. The way I put it to the people I speak with is your income is on sale now. You’re never going to get a time in our history where it’s going to be lower than this.

I’ve known some people that have made a radical step, extreme step with people that have $700,000, $800,000 sitting in their 401(k). We know the current tax brackets that the current administration put in, they’ll expire on December 31, 2025. The radical pro-tax socialist may want to try getting to repeal that. Chuck, I got to bring it up. You guys have a fruitcake in your state. She’s nutty as a fruitcake talking about tax and 70%, Alexandria Ocasio-Cortez. I don’t care if somebody makes $50 million, you will never convince me that it’s fair to give 70% of your income. It doesn’t matter.

There are a lot of misconceptions about the tax code. She’s not the only one. The guy I got in my district is no better but I live in a blue state. People look at that chart and they say, “I make $140,000 a year.” They look over the line and they’re like, “I’m at 25%.” That’s not how it works. It’s marginal. As a married couple, the first $18,000 roughly in income that you make, you’re going to pay 10% on that. I usually use the example when I talk to clients. If I have a client that makes $120,000 a year, they’re basically making $10,000 a month, which means sometimes that’s around Valentine’s Day, they go from paying 10% up to 12%. Sometime around Labor Day when they get up around $75,000 in income, it will jump again. It’s going to go from 12% to 20%. It progressively goes through.

Ocasio-Cortez was on 60 Minutes. She said plain and simple, “I’m not talking about taxing the regular people. If you’re making $10 million or more, we should charge those people 70%.” She made a couple of statements. She said, “There’s history that shows that.” She’s not wrong. She said back in the ‘60s. You don’t have to go back that far. Reagan passed his tax bill in 1981 and prior to Reagan when Carter was in office, the highest tax bracket runs in the 70s. It actually was in the 90s if you go far back World War II. That’s how we used to pay our bills. We didn’t run off the deficit. There was a point in time where they rounded the deficit because they didn’t even know what it is. You’re looking at it, it looks like you ever watch that clock. The depths of that clock look like a rat on a wheel.

When you get to the tax code and she talks about taxing people who are making $10 million or more, one-half of 1% of the US population makes more than $10 million, about 160,000 people. Those 160,000 people, their average income is $25 million. These are big swingers. I’m going to do some quick math for you. Riddle me this, $25 million, $15 million of it is over $10 million. That’s the difference between $10 million and $25 million is $15 million. She wants to tax those people 70%. 70% of $15 million, we’re up in a range where about $11.5 million in taxes. The effective tax rate on the first $10 million for that individual or couple is going to be about 37% or 38% for that person. There’s $3.8 million on the first $10 million, she wants to take $11.5 million from them on the next $15 million. We’re up over $60 million. If you start disincentivizing talented, wealthy people from earning, let’s go back to my months in the year example. In that example, if I’m making $25 million a year, I’m going to stop working in April. I’m going to stop at $10 million, I’m going to take the rest of the year off. I’m going to go back to work in January and now the $15 million that I did earn that the Treasury would have gotten 37% on that $15 million that’s about $5 million.

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They would have gotten $5 million from me but I’m a talented commissioned Wall Street guy making $25 million. I’m going to take nine months off. I’m not going to work after April Fool’s Day or Tax Day for that matter, April 15th. We just disincentivize some very talented people from going out and working. There’s actually a great example of it in our history. Ronald Reagan was the highest paid actor in 1945. Ronald Reagan was making $100,000 a film and at that time they were taxing 91% of everything over $200,000. He’d make two films and shut it down. Take about six weeks of film, by April he wasn’t making films anymore.

When he got elected, he obviously put into place his example because he lived it.

There are ripple effects to that. That is when the debt started to climb. The knowledge is key. If you know the rules, then you have a chance of finishing the game. Forget about winning the game, let’s finish the game. If you know the rules, you’ll finish the game. If you don’t know the rules you get bounced from the game.

Talking about the Roth, it’s like the story, “Should I pay taxes on the seed of the harvest?” If I’m a farmer and I go to the co-op and I go to the cash register and buy a little packet of seeds to go plant some okra. I’m bringing this way down to a juvenile example. Let’s say the packet of seeds is $1 and she says, “Hollis, do you want to go to pay the taxes right now?” I’ll say, “If I don’t, what happens?” “If you don’t pay the taxes now on this packet of seed, you’d go home and you plant the okra, and then whatever the harvest is, we’re going to put taxes on that.” I’m no genius but it makes sense to pay the tax now. I know a little bit about the tax code that we are in the lowest brackets in a long time. I’m going to go ahead and do that now. I’m a big fan of the Roth but you can put $6,000 into a Roth.

There are some exceptions to that, but there’s a limit what you can do. Too much of a good thing.

SMR 13 | Bad Uncle Sam

Bad Uncle Sam: Ronald Reagan was the highest paid actor in 1945. He was making $100,000 a film, and at that time they were taxing 91% of everything over $200,000.


I go back to why does the government say we only put $6,000 into a Roth?

They want your tax dollars.

The government can screw things up. Something could be going on well and the government wants to get in and regulate it. There’s an old saying about Ronald Reagan, “If it moves, tax it,” or something like that. I’m a very pro-limited government person, I believe in small government. Our government is way too big. The fact that we can only put $6,000 into a Roth, we do have something that is very similar to the Roth. We call it a Roth on steroids, a rich man’s Roth, an unlimited Roth. That’s what I’m doing with my own money and I eat my home cooking. I tell people, “If you’re contributing to your 401(k), I could even debate someone on if it’s worth doing that.” If you’re contributing to your 401(k) or if you’re overfunding your 401(k), maybe you should think about contributing up to the match. If you’re open-minded, call me and let’s sit down and I’ll show you what we’re doing with our own money, what I’m doing with me and my wife’s money. It’s something a little bit different. You’re missing that money in your paycheck and you’re going to put it in something I always say, “This is another asset class and uninterrupted compound interest.” What city in New York were you from?

I live in a small town about 70 miles North of New York City called Hopewell Junction.

People down here, when they think New York, we think skyscrapers.

My soon to be son-in-law live seven miles from me and his family has a horse farm, a couple of hundred acres.

I’ve never been in New York, but I think liberals and skyscrapers.

You’re not wrong but that’s New York City. You get outside of New York City where the people aren’t and you’ve got a lot of farmland and a lot of conservatives.

Knowledge is key. If you know the rules, then you have a chance of finishing the game. Click To Tweet

Chuck came down from New York and we had a couple of meetings. I talked about it before on this show, there’s actually a book called The Power of Zero. There are several different topics we can go to on that. I want to give my story because anytime that I can show someone or educate someone on how to avoid taxes in retirement, how to avoid the hurdle of taxes. I like it. Me and my sister were ripped off because both our parents are deceased. My parents like all of us are forced. We have no choice to pay into Social Security and Medicare. The government pretty much every paycheck gives me the middle finger when I got to pay the Social Security because the government’s pretty much saying this, “Hollis, we think we can manage your retirement income better than you can. Give us this money.” It’s crap because my mother died of ovarian cancer at 54 years old. She was four months shy. She applied for Social Security Disability and she died before did. My mother worked as a registered nurse, work night shifts all these years, and never got a penny from our Social Security or Medicare.

My dad died very unexpectedly seventeen months later of a pulmonary embolism. I’ve taken my dad to the Social Security Office in Baton Rouge in October of 2007. He said, “I want to start receiving my Social Security the month I turned 65, which was in March of 2008.” We walked in the office here off of Harding Boulevard. It was a pleasant experience. It wasn’t a big deal. He gave his license. We sat down. It took about an hour. Luckily my dad had enough income where he was going to turn on both faucets, Medicare and Social Security in the same month. He died the next month after we did that. My dad never got a penny from his Social Security. Chuck, where’s the money at? When my mother passed away, my dad got a $255 check to have a burial.

Does that buy a shovel?

I don’t know how it passed Congress, the provisional income. That’s what the government calls other income. The government dangles this 401(k) and encourages us to put into it. We do for 30, 40 years and most people have their assets, their wealth inside their IRA 401(k), they get penalized on their Social Security because their money is in the 401(k). Chuck, tell us about The Power of Zero.

I want to get into that Social Security because it’s going to dovetail into The Power of Zero. The way the rules work and what most people don’t understand is, yes, you are forced to pay into Social Security. They say by 2022, there will be more people collecting than paying in. You want to know what drives our inflation. The way the rules work is when you put that money into a 401(k), all your life you think you’re doing a smart thing. Any type of savings is a good thing. You put it in there and then when you do want to start taking it out, if you want to make a decent living and you’re going to supplement your income, you’re not working anymore, we’re going to take those nest eggs, if it’s coming from a 401(k), it’s considered ordinary income. The government has a rule, provisional income. They have a means test of whether they’re going to tax your Social Security. A lot of people don’t know this.

I’m shocked that so many people don’t know it. Maybe a year or two away from retirement, they don’t know the rules.

SMR 13 | Bad Uncle Sam

Bad Uncle Sam: What most people don’t understand is you are forced to pay into Social Security.


As a married couple, if you’re making more than $44,000 a year, the cost of living is a little less down in Louisiana than it is in New York, but who can live on $44,000 a year? If you’re making more than that as a married couple in retirement, reporting ordinary income, then 85% of your Social Security is going to be tacked on to your ordinary income and you’re going to be taxed on that. If it’s between $32,000 and $44,000 then they only tax half of it. If it is reportable income and you’re under $32,000, then your Social Security’s tax-free. Part of The Power of Zero is literally finding a day where we can get all of your income or all of your assets into asset classes where the income derived from those assets don’t show up on your tax return.

I’ll go into some of the examples that you and I are working on with clients. We have clients that are making $300,000 in income. Real estate, working income, retirement income, and God bless them. They worked hard for that but we’re able to take their portfolios, wash them through some smart tax planning. It doesn’t happen overnight. It’s going to take years but the younger you get into this, 40s is a beautiful age to start thinking about this stuff, 50s, but it’s never too late. The idea is let’s get all of your assets into classes that when they start generating income, they don’t show up on your tax return. As long as it’s under that $32,000, we can get somebody $300,000 a year in income. They never have to pay taxes on the income because it’s in an asset class that’s tax protected. It doesn’t trigger taxation on Social Security. That’s the route of The Power of Zero.

Talking about the power of zero and it’s what I call it too, I learned from that from a friend of mine in Tennessee getting some of your wealth off the radar screen of IRS. He has a client who has several collectible cars worth over millions. His million-dollar home is paid for and is very wealthy. He’s been doing this strategy for over twenty years. All his wealth is in the strategy we’re talking about. My friend, Tom, says that if this guy wanted to, he could go down to the Tennessee Medicaid Welfare Office and apply for food stamps because none of his income is reportable. What we do is when we meet someone and it’s a fact-find. We got to find out what’s going on, what you have and see if this is appropriate. It’s never too late to look. The couple in New Orleans that we got done working with, the husband’s over 60 and it’s never too late. If we can’t get you on The Power of Zero, if we can get them to a tax bracket or two lower, we still won and we still have achieved something.

It’s about efficiency.

I’ve come across some people who can’t receive The Power of Zero. Maybe they’re getting a pension but we can still get them maybe in a lower bracket or two and that’s still a win. The provisional income blows my mind. It blows my mind that Congress passed that. The 401(k) started when tax brackets are really high. Executives and wealthy folks were looking for a loophole. The tax brackets are not high now. I don’t have any of my assets in a 401(k). I don’t put anything into a 401(k) or a Roth. I don’t believe in it and for one thing, I think the market is too volatile now. Let’s look at the last 60 days of the market. It’s very volatile. It’s bipolar. We don’t want to hang around volatile people. You don’t want to hang around a volatile person. Why would you want your money in something that’s volatile like that?

It’s a situation that you’ve got to know the rules. If you understand how it works, volatility can be wonderful. One of the things we employ with a lot of the clients that we work with is an indexing strategy. All indexing strategy does is it allows you to collar what the markets are doing. You get to pick points that if the market goes below a certain point, “I want to make at least 2% on my money. If the markets are down, you’ve got to promise me I’m going to make 2%. That’s okay or maybe at zero. I don’t want to lose. I’m okay if I don’t make any money this year if the markets are down. I don’t want to lose money. If the markets are up, I want to make money.” We collar using index in products.

Warren Buffett has two rules to investing. Rule number one, never lose money. Rule number two, don’t forget rule number one. It’s about being educated and knowing the rules of the tax code and optimizing. That’s my new word. I’m always looking up words with my children on my little Webster dictionary app. I want to optimize the tax code. I’m not a certified financial planner. I’m not a financial advisor. I don’t do stocks and bonds but I’m convicted in a couple of strategies that all come down to taxes. I love the oil and gas investment. There’s a great, phenomenal tax deduction in that but we’re not talking about that. We are talking about another strategy that we can implement that is tax-free income retirement and it’s not an annuity. It’s very similar to a Roth, to what I call unlimited Roth. What if there was something similar to a Roth that you could put $50,000 a year into it? You’re like, “Hollis, what are you talking about? Is there something like that?” Senator Roth went to certain parts of the tax code of the strategy that we’re talking about to make it. It’s about being educated and learning what else is out there? Chuck, why don’t you tell our audience if they’re interested in calling or get in touch with us, how the process works?

Any type of savings is a good thing. Click To Tweet

We work with a program called Bad Uncle Sam. You can go to BadUncleSam.com to get started. First thing you’re going to do is I’m going to encourage you, there’s a great video on there. It’s about twelve minutes long and it tells a story of two friends that grew up that were very similar. One of them went along with Bad Uncle Sam and the 401(k) planning and everything that we’re talking about now that the average person does, he did it that way. The other one followed our advice and started doing some of the strategies that you and I are talking about. They lived parallel lives making very similar income with these two different strategies and the end result is stark. It’s actually an exaggerated example, which most good marketing is. It’s an exaggerated example of what’s going on out there. If you go to the website, you can engage in our program. The great part about it is you’re going to end up talking to me and Hollis. We’re partners in this. We do this together.

I’m going to sit across from you face-to-face, probably over a hot cup of coffee or two and do some fact-finding to see if we can get some of your wealth off the radar screen of the IRS. Some of the things that we do, when you start taking income out of it, it’s not reportable to the IRS. It’s according to the tax code because people say, “Hollis, is this legal?” Yes, it’s legal. It’s not reportable. I did see something on TV, they’re trying to do a 1040 form. You do not report this income anywhere in the 1040. You don’t put it on there. It’s not reportable. If there’s no other income on the 1040, then the Social Security is not taxable. We know that everyone can’t get into the 0% tax bracket but it’s a goal. We can potentially lower a bracket or two that you’re in, we say a win. For this extreme liberal, communist, socialist, or whatever, they were bashing the administration’s new tax laws that put into effect. My wife’s first paycheck as a teacher, she netted more money. That’s a win.

Hollis, I’ve got a great example. The repatriation tax. If you want to know what smart people are doing the type of things that we’re talking about, go look at what Apple did. Go look at what Microsoft did. These companies had billions of dollars that were offshore in China and other countries in manufacturing. They wouldn’t bring it back to America. The reason why they won’t bring it back to America is because the government wanted 40% plus. They don’t want to get hammered on the tax. When Tax Cuts and Jobs Act was passed in 2017, they dropped that tax down to 20%. What did Apple do? They are building HQ2 in Brooklyn. How are they doing that? They repatriated a couple of $100 billion because they saw that income is on sale right now. There’s a deal going on and that deal is going to expire when Tax Cuts and Jobs Act expires on December 31, 2025, and taxes will go up. That’s what the law says. They can change the law, they do it all the time.

Take the example that happened. The current administration had a two-year period that ended where they had the Senate and Congress were both right. They were able to pass a new tax code and makes these new rules that put all of our income on sale and gave these huge companies the ability to get their money back here to America offshore. Start developing in our nation, putting headquarters here. That headquarters would not be in Brooklyn, it would be in Europe somewhere, it would be in China. They were able to do that with no help whatsoever or no support whatsoever from the left. “This is our tax bill. We don’t need any of your support. We have the numbers.”

What’s going to happen in the next 30 years? Forget about the centrist left. They don’t scare me. The first Clinton was centrist. He was a very good politician. My point is when we look at the tax code and we look at the history of taxation, what happened? Are we naïve enough to think that in that timeframe, there’s not going to be a two-year window where one of these very left liberals is in office and has a left-leaning Senate, a left-leaning house and they can’t pass their tax bill and Ms. Ocasio-Cortez gets her 70% on the rich? What happens? I don’t want to get into the shock and awe but are we really naive enough to think that that’s not going to happen at some point? Are you ready for that? Have you actually seen the consequences of that? Forget about 70% on people making more than $10 million. The other thing that Ms. Ocasio-Cortez doesn’t understand is when she was talking about this on 60 Minutes, that 70% tax that in the 1970s and into the early ‘80s was levied on the highest tax bracket, it wasn’t $10 million above. That started at $200,000. $400,000 for a married couple, $200,000 for a single individual. Now, you’re talking about the middle class. If we’re levying and 70% taxes on somebody that’s making over $400,000, can we afford that as a nation?

That’s what some of our founders left. That’s why they came here. I can’t believe that Congress somehow passed the means test, the provisional income because Social Security is tax dollars. If I didn’t know any better, I would say that they came up with the 401(k) first but they said, “Let’s not implement it to the ‘80s but let’s go ahead and start Social Security now. Let’s dangle the carrot and encourage people to put money in the 401(k), but if they have all their wealth or the majority of their wealth on the 401(k), we’re going to hammer them on their Social Security tax.” You’re talking $250,000 in unnecessary taxes on Social Security over a 25-year period that some people are going to pay only because of where their money sits. I have a little saying that I learned, “Where your money sits is more important than the rate of return.” All these folks are chasing rate of return. When I thought of a number out there, $200,000 to $250,000, of course that depends on how long you live while you’re drawing Social Security. The 401(k) is a partnership with the government. People don’t realize that is a partnership with the government.

SMR 13 | Bad Uncle Sam

Bad Uncle Sam: When Tax Cuts and Jobs Act was passed in 2017, they dropped the tax down to 20%.


The percent owner that the government has, a percentage of your partnership that they own, they get to change. They own 20% of someone making $250,000 a year. They could change that to 60% later on after you have your money in that tax drop.

I was talking with a guy and he has a lot of money with a broker in downtown Baton Rouge. I blew his mind when I told him this. He has $800,000. I said, “Is that yours? How much of that is your money?” He’s like, “I know I owe some money in the government on this.” Let’s take an extreme example. I know you would never do this, but you may. If you have $1 million, a lot of these ExxonMobil retirees, someone works at ExxonMobil 25, 30, 35 years, they walk away from there with over $1 million in the 401(k). The government is your partner. If you’re paying a money manager 1% or 2% to manage your money, let’s say 25% of that you’re never going to get because of taxes. $250,000 of your $1 million you’re never going to get but you’re still paying the money manager 1% or 2% fee to manage money that you’re never going to get. That blows someone’s mind. The first time I heard that I was like, “That’s profound.” It’s profound because people don’t realize it’s a debt. It’s not like a debt that you owe your next-door-neighbor $10 but if you have money in a 401(k), it’s a debt to the IRS. You owe that money.

You don’t know what the percentage is, the rules change.

It’s an unknown date and an unknown rate because we don’t know. They change depending on who’s controlling the White House. I don’t want my money being controlled or affected by what Congress, what party because I do think they are both corrupt. What party is in the White House or Congress? I don’t want to deal with this 25 years or 30 years from now on paying taxes at an astronomical rate. When I look back, I could have paid it at a much lower rate when I was 40 or 42. I’ve been very fortunate and very blessed to be around some smart people and I’m not afraid to ask questions and I ask them. I have a friend, Mike, a mentor of mine. He’s in his early 60s, “What did you do when you were 40 that you’re happy you did?” I want to learn from other people’s mistakes. We’re not reinventing the wheel. All we’re doing is taking advantage of the current tax laws. We know and we understand them. We’re following them and doing what the ultra-wealthy are doing but we scale it down to what someone’s assets are or their income. Call me at 202-SAGE. That’s 202-7243. You can go to the website, SageMoneyRadio.com. You can send me an email from there. Chuck, I’m honored and privileged to have you with us.

It was an honor to be here.

If you heard something interesting, don’t hesitate to give us a call or send me an email. God bless you. God bless the USA.

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About Chuck Omphalius

SMR 13 | Bad Uncle SamChuck Omphalius is a senior management experience and highly developed talents in tax-smart retirement planning, new business development, strategic alliance building, client satisfaction, and multi-account management.

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