September 15, 2024

If You said, UP, then why are You putting money into a tax deferred IRA?

Most people believe taxes will go up dramatically, in the future, because our government is so far in debt! As of today, we as a country, are $35, 365, 260, 725, 741.00 in debt. Let me say that again, that’s over $35 Trillion in debt! That’s $269, 269.00 per taxpayer. Congratulations!

It’s been said, that 1 million seconds, would give us 11 ½ days, while 1 Trillion Seconds would give us 31,710 years! We throw around these numbers without realizing the magnitude of them.

So, 1 million is a big number, now let’s increase that number to 35 trillion. Wow! It’s beyond our comprehension. So, with this massive debt load, as a country, we will need to increase taxes and cut spending and grow our economy if we want to remain solvent.

So, will taxes need to be raised in the future? You betcha.

So, why then are we funding our Retirement Accounts with tax deferred IRA’s? A future higher rate on a future larger amount only benefits the government, not You.

If You are making $60,000 a year and are in the 12% Tax bracket now and put $10,000 in your Roth IRA this year, You would pay roughly $1,200.00 in taxes this year on that $10,000.

If You put that same money in a Traditional (tax deferred) IRA, You would pay zero taxes on that $10,000 this year, BUT You would NOT KNOW what You would pay on that $10,000 say, 20 years from now. If that money grew to $20,000 in 20 years, and now the tax rates jumped to 24%, (they predict tax rates will double), You then would pay $4,800.00 in taxes on that original $10,000.

$1,200.00 now or $4,800.00 later?

What if You added $10,000 per year, for 20 years? Your tax bill would then skyrocket!

In her book, “The Bank on Yourself Revolution” by Pamela Yellen, there is a novel way to produce ZERO tax income using Cash Value Life Insurance with a rider, that allows Your Cash Value to grow without any tax consequences. Another “Power of Zero” Strategy.

The death benefit is tax free, You can borrow from your Cash Value when You need it, and pay it back to yourself with interest. The Cash Value grows at a steady rate of 6% or so, and it’s not in the volatile stock market. Also, and this is big, when You borrow from Yourself, the money is NOT deducted from Your Cash Value balance, but is deducted from the Insurance Companies’ balance sheet, and they use Your Cash Value in Your Account as collateral. So, You’re borrowing the money while Your Cash Value account keeps growing! Pure Genius.

If You know the story of Walt Disney, he wanted to start a theme park based on his cartoons of Mickey Mouse and Donald Duck. The banks laughed at him. So, he used the money (Cash Value) from his Life Insurance Policy to fund the Start of Disney World. Not a bad idea. You know the rest of the story.

So, if you want to do what the rich people do and have Your assets grow tax free, and avoid the coming tax increase armageddon, then a “Bank On Yourself” strategy may be your ticket to Retirement wealth. Reach out to us if you’re interested in how to grow your assets more effectively.