Everyone either has a financial specialist or
they do it themselves. In either case, ask yourself these questions:
- Is your strategy the best strategy
possible?
- Are you calculating in the lost
opportunity cost on every financial move?
- Would you like to verify that your assets
are performing in coordination with one another to maximize
your benefits, reducing risk, and maximize your
control?
Below is a common example of people not
realizing the whole story of only one component of many in a
person’s financial model. One component of the model is the
retirement box or 401(k).
- Financial institutions, represented by
financial planners, promote putting money in their
“retirement savings box”. They know that locks, in the form
of taxes and penalties, will keep it there for their long
term profit. They also know it creates dependence on their
“lending box” to finance our ongoing needs and wants,
forcing us to pay out a volume of interest dollars that is
far greater than we can earn. On balance: they win, we
lose.
- Government promotes such plans knowing that
many “participants” are forced by circumstance to use
“their” money before maturity, causing heavy penalties on
withdrawals or multiple income taxes on loans from the
plans. Ultimately, government owns an “annuity” on our lives
with guaranteed tax paydays as long as we live and windfall
profits when we die. Participants in these plans are the
government’s money farm. (Name one economically viable
reason for penalties other than governmental
greed.)
- Financial planners promote such plans knowing
that tax laws guarantee they will be regularly called upon
to handle rollovers of large bundles of locked-up money,
earning large commissions every time. So, “Max your
contributions baby; we’re here to help”!
- Employers promote such plans, taking credit
for “enabling” employees to put their own money away. Some
have matches, but they disappear in tough times and pale in
comparison to the “old days” when 100% of a retirement plan
money came from them.
- The account statements would be fraudulent in
any other industry. They create the illusion that what you
see on the statement is yours. 100% of “contributions” are
shown as an account balance, hiding the fact that unpaid and
totally unavoidable taxes are a very large part of that
number. It’s a deceptive practice. It is virtually
impossible to withdraw anything near the amount shown. Other
financial vehicles require so-called “full disclosure” – why
not 401(k), IRA, 403(b) and other “qualified”
plans?
- Maximum “contributions” promote the illusion
“this is so good we’ve got to limit it!”
- Plan administrators consistently break laws
requiring “full disclosure” and “investment suitability”.
Out of hundreds of participants interviewed, NOT ONE knew
the facts or completed a fact finder to determine if
participation was even appropriate for
them.
- Most participants anticipate lower taxes at
retirement. However, deductions for mortgage interest and
children will be gone. Income tax rates, not capital gains
rates, are applied to every penny taken from qualified
plans. Tax rates are subject to the whims of Congress. At
one time the marginal rate was 70%! Does it make any sense
to defer payment of 15% only to pay 30%, maybe even 70%,
later?
- Much of estate planning is about schemes to
bypass children and pass plan money to later generations,
hoping to avoid the “tax bomb” built into 401(k), IRA, and
similar plans. This proves the problem, and begs the
question “do I even know who I’m saving my money for?” We
urge you to ask yourself that question now, and to make sure
that what you do will achieve what you actually
want.
Whether its fraud nor not, most financial
planning totally fails to acknowledge the economics of
personal finance. “Features” of 401(k), 403(b), self directed
IRA, and TSA type plans are only attractive on paper, the
financial planner’s “showroom”. But, we don’t live in
showrooms. We have real cash flow needs, face real change,
uncertainty, and events in our lives over which we have no
control. We believe that plans must be “tested” against the
environment of reality, not the artificial “boy in the bubble”
environment.
- Would you like tax free growth?
- Would you like access to your money
without penalties?
- Would you like to eliminate the
inflationary impact on your wealth?
- Would you like to eliminate the tax and
the deferred tax calculation?
Call Strategic Wealth Solutions for a no
obligation consultation to see if we can engineer a financial
strategy that will give you more money available to spend at
retirement, maximizing your tax deductions along the way, and
without the fear of running out.
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