Plan Now to Shield Yourself From Higher Taxes

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Plan Now to Shield Yourself From Higher Taxes
<a href="https://pixabay.com/users/mohamed_hassan/">mohamed_hassan</a> / Pixabay

The Federal debt has surpassed the size of our entire economy. That hasn’t occurred since the end of World War II 75 years ago. And it doesn’t even include President Biden‘s $1.9 trillion COVID bill and other plans in the works to eliminate the Trump tax cuts, raise the corporate tax rate, and as much as double the capital gains tax rate.

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Q4 2020 hedge fund letters, conferences and more

The Impact On Americans' Retirement Savings

This revelation from the Congressional Budget Office deserves more attention than it's receiving "because Americans will be paying for it for decades," the Wall Street Journal Editorial Board notes. Pamela explains the impact on Americans’ retirement savings:

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“This has made saving in tax-deferred accounts like 401(k)s and IRAs much less appealing going forward. The Society of Actuaries has pointed out that if all things are equal, you'll come out the same whether you defer your taxes until you take retirement distributions… or you pay your taxes up front and then can take tax-free withdrawals. However, if tax rates go up over the long term - which now appears inevitable - you will end up paying far more in taxes.

“Most people look at their retirement plan balances and think it's all theirs. They often forget they'll owe the IRS taxes on every penny they've put in and every penny of growth they've deferred for decades. According to the Center for Retirement Research, ‘it's a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had.’ And that statement was made several years ago before the federal debt exploded!”

Pamela Yellen is founder of Bank On Yourself, a financial investigator and the author of two New York Times best-selling books.

Shield Yourself From Taxes

To help savers protect themselves, Pamela recommends The Bank On Yourself safe wealth-building strategy. Advantages of this method include:

  • Funds can be accessed tax-free, under current tax law.
  • Income from these plans does not cause Social Security benefits to be taxed, unlike 401(k) and IRA withdrawals. “It's fairly common for even middle-income folks to owe taxes on up to 85% of their Social Security benefit. However, the income you take from Bank On Yourself is not included when the IRS determines whether (or how much) of your Social Security check is taxed.”
  • Income isn't subject to capital gains taxes.
  • Does not increase Medicare premiums (income from conventional retirement plans like 401(k)s and IRAs can increase premiums by as much as 350%).
  • Savings are guaranteed to grow by a predictable amount each year regardless of what happens with the stock market.

“You can grow your nest egg safely and predictably every single year, shield yourself from taxes that can only go higher, and enjoy liquidity, flexibility and control of your money,” Pamela says.

 

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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