Do you have an IRA or 401K?
You may be getting trapped. Free yourself now! Congress is Peddling IRA/401K Snake Oil.
Most Americans who are concerned about preparing for retirement are lured into contributing pre-tax dollars into 401 K plans or tax-deductible contributions into IRA’s. Such “Qualified Plans” only give you tax-favored advantages during the contribution and accumulation phase of your retirement account. What about the most important phases-when you withdraw the money for retirement income or transfer any remaining funds to your heirs? Has anyone told you “The rest of the story?”
An average couple filing a joint tax return with a taxable income in excess of $ 77,100 in 2007 will be in a 34% marginal tax bracket (includes federal and state taxes). If they were fortunate enough to both qualify for deductible contributions to their lRAs, they would save $1360 a year in taxes on a total contribution of $4000 a year. However, most retirees will pay back every dollar to Uncle Sam that they saved in taxes over 30 years of contribution in the first 18-24 months of their retirement. In fact, the average retired couple will pay 8-12 times the taxes during their retirement years than the taxes they saved during their contribution/accumulation years.
One of the original IRA’401K tenets held that deferring tax until retirement was advantageous because withdrawals would likely be at a lower rate. That is no longer axiomatic. You may well spend retirement in the same or higher bracket if you accumulate a respectable retirement nest egg. In fact, tax rates will likely rise in the future. So why postpone the inevitable and compound the tax problems?
Is there a way to “Have your cake and eat it too?” Through proper planning, a homeowner may safely utilize an equity retirement plan that may provide tax advantages during the contribution and accumulation years, but more importantly, you may enjoy tax-free income during the retirement years and transfer any remaining funds to your heirs tax-free. This strategy can increase your net spendable retirement income by as much as 50%!
To understand how to determine if participation in a Roth IRA, traditional IRA or 401K plan is wise in your circumstances; the American Educational Institute conducts an educational seminar entitled “Common Sense Strategies for Successful Equity Management.” If you do not live in the Houston, Texas area please continue to read this blog for additional information.
Finally, call our office @ 713-871-5919. By asking you a few questions we can determine if you qualify for a more beneficial program.
Note from Paul Ferraresi:
(I am a certified member of Doug Andrew’s Missed Fortune Team. Doug’s books are New York Times bestsellers. With the certification I am able to teach courses and provide counseling to individuals on proper home equity management and retirement wealth creation. The workshops are taught through an affiliate, The American Education Institute. The 4 part multipart series will provide you with insights into many counter investment concepts. These concepts are used by the wealthy. Unfortunately, the concepts are not used by those who are not wealthy. If only…)
“Why Didn’t Somebody Tell Me the Rest of the Story?”
| Annual IRA/401K Contribution = | $4000 X 30yrs = $120K Total contributions |
| Tax Bracket (Income > $46,700) = | 34% (Fed + State) |
| Tax Savings = | $1360 X 30yrs = $40,800 Total |
| Net Outlay = | $2,640 per year |
| $4000/year @ 10% for 30 yrs = | $723,774 |
| X 10% | |
| 72,000 | |
| X 34% Tax Bracket | |
| (24,480) Annual Tax | |
| = | 47,500 Net Income |
In the first 20 months of retirement, every dollar of taxes saved during 30 years of deductions will be paid back. In fact, a person living a normal life expectancy will pay back over 10 times the taxes, on a qualified, retirement plan, during the retirement years than the taxes saved during the contribution years.