Avoid the IRA & 401(k) Tax Deferral Trap-

You’re advised these days to save for your future in tax deferred 401(k) or IRA accounts.  Unfortunately, doing so sends you straight into “The Deferral Trap,” which could cost you up to 35% of your savings.  Forbes magazine (Dec 13, 2004) first warned that most people unknowingly and unnecessarily make this expensive wealth transfer when they fund their tax deferred accounts.

Learn how the true costs of these plans will impact your future lifestyle and compare that with the perceived ‘benefits’ you’re told these plans offer you today.  Choosing to ignore this information could be an extremely costly decision.  You may reconsider your saving strategy.  Get your Special Report “The Preferred Personal Savings Plan for Our Times” HERE

Would you like to:

• Have complete freedom to choose how much to set aside on a tax advantaged basis and avoid the contribution limits of qualified plans like a 401(k), IRA or SEP IRA?
• Create a tax free income stream you won’t outlive that can reduce your taxes, especially in your retirement years, so you retain control over more of your hard earned money?
• Have the potential to earn a double digit rate of return when the market increases and not lose a dollar when the market declines?
• Have the ability to pay NO taxes at all on the growth of your cash?
• Be able to access your funds tax free and penalty free any time for any purpose and avoid the restrictions of qualified savings plans?

If you answered yes to any of these questions, call me at 425-829-4110 to see what track you’re on. Get a FREE analysis showing how much you’re on track to pay in taxes based on your current investment accounts and how much you could save in taxes if you execute a few easy-to-implement adjustments. And, receive your FREE copy of the best selling book, Tax Free Retirement, by going through this painless but enlightening process today.   It’s all possible.  See how in the videos below.  What would if mean to your lifestyle if you could retain control of your money?  Would you exchange 35 minutes of your time to save $50,000, $100,000 or more in taxes?

• Bob and Carol did and they saved $149,600 in taxes during 22 years of retirement.
• Dr L did and he’ll save $199,700 in taxes during 21 years retirement.
• Jim did and he can put away $100,000/year and save over $520,000 in taxes over 20 years.
• Dr M did and he can put away $60,000/year and save over $1,062,000 in taxes over 24 years.

Jeff & Lisa were heading into the trap.  They made 2 small adjustments that saved them $31,843 in 1 year in taxes and $253,824 over 10 years.  Find out what course you’re on and if you could do the same – or better!  Request your copy of “The Preferred Personal Savings Plan for Our Times” HERE.

Part 1- (recommend full screen for better resolution)

Part 2-

Part 3-

See Arrow #4 – Their ‘Current Plan’ had Jeff and Lisa on track to pay $33,172 in taxes during this year.  Implementing two simple recommendations from us changed their tax bill to $1,329, saving $31,843 in this year alone!  If this were your situation, which check would you prefer to write?

See Arrow #5 – During their first 10 years in retirement, implementing the same tactic saves them $253,824 in taxes.  Wouldn’t you prefer to keep that money and make your own decisions about what to do with it?  (Watch Video Explanation Here.  Then continue below.)

Noforonek

If you’re funding tax-deferred accounts (401K, 403b, IRA, SEP IRA, Self-directed IRA, etc), you’re setting yourself up to pay higher taxes in the future than necessary, e.g. $33,172 at arrow #4 and to pay the $253,824 at arrow #5.

Is that really what you want to do or is that what your favorite Uncle wants you to do?

Contributions to tax deferred accounts reduce your taxes today.  But, ‘defer’ means ‘to delay’ paying taxes to the future.  You’ll likely pay much more in taxes – 5 to 10 TIMES more for the average American - on your ‘deferred’ account distributions than you ‘saved’  in taxes during your contribution years (unless you die within a few years of retiring.)  Make sure you know how this works.  Do the math on it.  Ignorance is expensive.

Americans are notoriously focused on the benefit they’ll receive today – i.e. your income tax deduction this year.  They make decisions that benefit today but cost them heavily in the future, as demonstrated in the case study videos on this website.  Uncle Sam knows this all too well and counts on our national shortsightedness and need for immediate gratification.

Answer this question:  Do you think tax rates will be lower, about the same, or higher in the future?

If you, like me, expect tax rates to be higher in the future, then the differences at Arrows #4 and #5 (above) will be greater.  Even using today’s tax tables, the numbers in this example are dramatic.  If tax rates do go up in the future, does it make sense to save money in vehicles that delay taxes to the future?  Watch this short video-

It’s important to know that tax rates have been higher in the past.  For the last 2 decades, tax rates have been at historic lows.

See Chart 2. (click photo for larger view)

The link below to The Tax Foundation cites income tax rates from 1913 to 2009.  See for yourself where taxes have been in the last century when the government had crises it needed to pay for.  (Given the financial obligations our government has created for us in 2010, is there any doubt one of the ways to address these problems will be higher taxes in the future?)  Americans endured tax rates up to 94% through the 1940s and 50s, and 70% in the 1960s and 70s.  Perhaps you’re old enough to remember.  In case you’re not, the facts are in this link:

http://www.taxfoundation.org/files/fed_individual_rate_history-20091231.pdf

Could tax rates work their way up toward where they were before?  The pendulum begins swinging back toward the higher averages when income tax rates go up on January 1st, 2011 when the 2001 and 2003 tax cuts expire.  Everyone will be affected.  Those currently in the 10% tax bracket will see a 50% increase in their taxes to 15%.  Those currently in the 35% tax bracket will see a 13% increase to 39.6%.  Everyone in between will slide up comparably.  (http://atr.org/update-days-untilbr-largest-tax-hikes-a5418)  That makes this discussion even more important.

What’s your strategy to accumulate money that’s protected from future higher tax rates?

Not tax deferred – that’s setting you up to pay higher taxes later.   Tax Free.

Look back at the picture to see the impact of saving money in ‘tax deferred’ accounts vs. ‘tax free’ accounts.

Arrow #4 points to taxes paid following the Current Plan.  This is what’s practiced by most Americans and could be what you’re doing, too.  It’s the accepted ‘conventional wisdom’ of our day.  But it’s based on erroneous assumptions rooted in an outdated economic model.  And, it’s a huge mistake!  Would you rather pay $33,172 or, would you rather pay the $1,329 shown on the second line of arrow #4: the tax paid in The Family Plan?  If you allow yourself to get caught in The Deferral Trap, you’ll pay the $33,172.

Arrow #5 shows the Tax Difference for that year, $31,843, and the Cumulative tax savings in The Family Plan after 10 years, $253,824.  Would you rather keep that money and decide how to use it, or would you rather pay it to the IRS?

If you advance 10 more years to age 87, the savings are even more profound.  The Tax Difference that year is over $34,000 and the Cumulative Savings are over $590,000 during a 20 year span.  Again, would you rather decide what to do with that money or would you rather send it to the IRS?

It’s also important to note that Jeff and Lisa’s ”Current Plan” runs out of money at age 91.  They’ll be living only on Social Security from that time on.  The two simple changes they implemented in “The Family Plan,” which have literally no impact on their current lifestyle, supplies enough income to maintain their standard of living past age 100.  Wouldn’t you want that kind of security for yourself and your family?

Make sure you don’t pay taxes like what’s shown in the “Current Plan” and you keep the “Cumulative Savings” to use as you like.  Find out what course you’re on and what the difference could be, if you don’t already know.  ONE or TWO small changes could dramatically affect how much money you get to control and ensure you don’t outlive your money.

Let’s re-visit a question from above:  Do you think tax rates will be higher in the future than they are today?  Given our state of fiscal affairs, how can’t they be higher?  By all means, you should pay what you’re required to pay in taxes.  But, there’s no reason to pay any more than you have to.  Furthermore, with the cost of living likely to rise with inflation in the coming years, we could all benefit by keeping control of as many of our hard earned dollars as we can.  There are legally sanctioned ways available to you, if that’s what you want.  I’ll show you proven strategies that capitalize on Internal Revenue Code 7702 and 72(e), along with 3 Tax Acts from the 1980s, TEFRA, DEFRA and TAMRA, that have brought these benefits to thousands of Americans for several decades.

Does your Current Plan have you on track to pay ‘$33,172′ or ‘$1,329?’  Run your numbers through our software so you can see how your Current Plan will perform.  Learn whether there’s a “Family Plan” alternative that could dramatically reduce your future tax burden and increase the amount of discretionary income you can keep.  Wouldn’t you want to know for certain?  Of course, you can send the money to the IRS if you prefer.

It’s a free, no obligation conversation today that will hurt lot less than the cold slap in the face from reality later.

What do you have to lose from such a conversation?  You’ll lose much more by NOT having the conversation.  What if our conversation shows you how to save $1000?  Would that be worth your time?  What if your number is $10,000 or $100,000?  Would that be worth your time?  You’ve seen real numbers – $32,843 and $253,824 - above.  For several clients, this conversation has been worth over $500,000 in tax savings alone.  And if we run your numbers through the software and find you’re optimized perfectly, won’t you sleep even better at night?

Position yourself to start benefiting today.  Call 425-829-4110 or email scott@scottscholz.com and schedule your FREE, no obligation consultation today.  Or request our free report “The Preferred Personal Plan For Our Times.“  Or you may go HERE and request a copy of the report be emailed to you. At the very least, don’t leave things as they are – DO something to protect yourself!