ED SLOTT'S STAY RICH FOR LIFE
You will have a plan when you retire, either the one you plan, or the one that is planned for you.
In these tough times, Slott calls it the YOYO economy - You're On Your Own.
Since corporations can no longer take care of their employees and have shifted the burden by using 401ks, and the government is also broke, it's up to you to take care of your financial needs.
"I'm proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money."
- Arthur Godfrey
401ks and IRAs are not taxed until they're withdrawn. But if you wait too long, Uncle Sam could end up taking more of it than you.
Top Federal Tax Rate
1918 77%
1946-1963 Over 90%
1964 77%
1965-1981 70%
1982 50%
"History does not repeat itself, but it rhymes."
- Mark Twain
These are just Federal tax rates. There are also state and city taxes. Some counties are broke too so they may need to tax more to get out of debt. San Mateo was hit big and lost a lot of money.
"There is no way for me to express how bad we feel about the loss."
- San Mateo County Treasurer
The Big Lie
You'd Be in a Lower Tax Bracket in Retirement
Free and Clear Forever
Not many people pay off their mortgage, but people used to do it. Why don't people think about their retirement savings the same way?
Take an example. Imagine having a $200,000 mortgage on a house worth $500,000. If you pay off the $200,000, you are free and clear. Now imagine having $200,000 in retirement savings. How much is your mortgage? You don't know because it's up to the government to decide how much they will take based on what they need at the time.
It's a good time to move accounts that are
Forever Taxed to
NEVER Taxed!
There are two vehicles to reduce the tax.
Roth IRAs and life insurance
Start Converting IRAs and 401(k)s to Roth IRAs
Roth Recharacterization
If you decide to convert, you still have time to change your mind.
Another benefit with the Roth IRAs is that you can keep your money in the account as long as you want.
Life Insurance
Single biggest benefit in the tax code. Some wonder why the government would give such a break. It's similar to deductions with charities. Why aren't they taxed? So the government won't have to give money to charities. Same with life insurance. They want to give you the benefit so they won't have to take care of you.
IRA Beneficiaries
If you list your son or daughter as the beneficiary, you can skip the estate tax. Additionally, it can be "stretched" to the lifetime of the son or daughter.
Real money is spendable money, money that can be spent. Rather than using the IRA as retirement money, take a life insurance policy out. Should that person die, the distribution would be estate and income tax free. The premium can be paid for from the IRA.
Another plan is to name the son or daughter as a contingent beneficiary.
Should the spouse die, the wife gets the $1,000,000 life insurance. She can then "disclaim" the IRA, goes back to the husband estate and goes to the daughter.
"Martyr Syndrome"
You refuse to spend your own money. Plan well so you can spend without guilt.
Five Step Plan
1. Know who you are and where you are.
2. Get educated.
3. Avoid mistakes.
4. Don't be short-sighted. Take the long view.
5. Take action in small, consistent steps.
Step 1 - Know Who You Are and Where You Are
Know . . .
- Your Time Horizon
- Your Risk Tolerance
- What You Want For Your Family
Have a Family Meeting
Step 2 - Get Educated
Advisor vs. Salesman
Use multiple sources with un-biased opinions.
Step 3 - Avoid mistakes
Some of the biggest mistakes are tax mistakes. Your investments may go up and down, but when you get taxed, you won't get any of it back.
Thinking someone else took care of it.
Impulsiveness - Hot tips
Too Good to Be True (Schemes and Scams)
Don't invest in something you don't understand.
Being a do-it-yourselfer. Get a professional advisor to help you.
Step 4 - Don't be shortsighted. Look at the long view.
Think about the benefit you'll get later, not now.
Step 5 - Take action in small and consistent steps.
Small steps = Big victories!
Ancient Greeks said that suffering arises from trying to control what is uncontrollable, or neglecting what is in our power to control.
You will have a plan when you retire, either the one you plan, or the one that is planned for you.
In these tough times, Slott calls it the YOYO economy - You're On Your Own.
Since corporations can no longer take care of their employees and have shifted the burden by using 401ks, and the government is also broke, it's up to you to take care of your financial needs.
"I'm proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money."
- Arthur Godfrey
401ks and IRAs are not taxed until they're withdrawn. But if you wait too long, Uncle Sam could end up taking more of it than you.
Top Federal Tax Rate
1918 77%
1946-1963 Over 90%
1964 77%
1965-1981 70%
1982 50%
"History does not repeat itself, but it rhymes."
- Mark Twain
These are just Federal tax rates. There are also state and city taxes. Some counties are broke too so they may need to tax more to get out of debt. San Mateo was hit big and lost a lot of money.
"There is no way for me to express how bad we feel about the loss."
- San Mateo County Treasurer
The Big Lie
You'd Be in a Lower Tax Bracket in Retirement
Free and Clear Forever
Not many people pay off their mortgage, but people used to do it. Why don't people think about their retirement savings the same way?
Take an example. Imagine having a $200,000 mortgage on a house worth $500,000. If you pay off the $200,000, you are free and clear. Now imagine having $200,000 in retirement savings. How much is your mortgage? You don't know because it's up to the government to decide how much they will take based on what they need at the time.
It's a good time to move accounts that are
Forever Taxed to
NEVER Taxed!
There are two vehicles to reduce the tax.
Roth IRAs and life insurance
Start Converting IRAs and 401(k)s to Roth IRAs
Roth Recharacterization
If you decide to convert, you still have time to change your mind.
Another benefit with the Roth IRAs is that you can keep your money in the account as long as you want.
Life Insurance
Single biggest benefit in the tax code. Some wonder why the government would give such a break. It's similar to deductions with charities. Why aren't they taxed? So the government won't have to give money to charities. Same with life insurance. They want to give you the benefit so they won't have to take care of you.
IRA Beneficiaries
If you list your son or daughter as the beneficiary, you can skip the estate tax. Additionally, it can be "stretched" to the lifetime of the son or daughter.
Real money is spendable money, money that can be spent. Rather than using the IRA as retirement money, take a life insurance policy out. Should that person die, the distribution would be estate and income tax free. The premium can be paid for from the IRA.
Another plan is to name the son or daughter as a contingent beneficiary.
Should the spouse die, the wife gets the $1,000,000 life insurance. She can then "disclaim" the IRA, goes back to the husband estate and goes to the daughter.
"Martyr Syndrome"
You refuse to spend your own money. Plan well so you can spend without guilt.
Five Step Plan
1. Know who you are and where you are.
2. Get educated.
3. Avoid mistakes.
4. Don't be short-sighted. Take the long view.
5. Take action in small, consistent steps.
Step 1 - Know Who You Are and Where You Are
Know . . .
- Your Time Horizon
- Your Risk Tolerance
- What You Want For Your Family
Have a Family Meeting
Step 2 - Get Educated
Advisor vs. Salesman
Use multiple sources with un-biased opinions.
Step 3 - Avoid mistakes
Some of the biggest mistakes are tax mistakes. Your investments may go up and down, but when you get taxed, you won't get any of it back.
Thinking someone else took care of it.
Impulsiveness - Hot tips
Too Good to Be True (Schemes and Scams)
Don't invest in something you don't understand.
Being a do-it-yourselfer. Get a professional advisor to help you.
Step 4 - Don't be shortsighted. Look at the long view.
Think about the benefit you'll get later, not now.
Step 5 - Take action in small and consistent steps.
Small steps = Big victories!
Ancient Greeks said that suffering arises from trying to control what is uncontrollable, or neglecting what is in our power to control.
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