Thread by @roncaruthers

1. What is your best option for saving money tax free?

A few days ago, I wrote a thread about how the federal government is giving #COVIDー19 affected workers

(which I presume will be everyone eventually) the chance to pull money from the IRA or 401k penalty free...

2. AND have 3 years to pay the tax.

You can read that here if you missed it:

https://twitter.com/roncaruthers/status/1249913913178611720

3. Anyway, NOW the question becomes where is the BEST place to put that money?

Especially if you believe, as I do, that taxes will go WAY up in the future.

If fact, I teach an entire class on this called How to Escape the Retirement Tax Trap

4. At the beginning of the class, I identify the 3 main ways you can save money:

-Taxable
-Tax Deferred
-Tax Free

5. I put holes in the buckets to represent that:

-on taxable accounts you get taxed both as the account is growing, and when you sell the investment.

-With tax deferred, you avoid taxes until you go to access the money, and THEN they want tax on ALL of it....

6. And in the previous thread I pointed out the difference between 'getting it over with' now, and waiting.

Go look at the math, and then come back. It will BLOW your mind.

Here is that link again:

https://twitter.com/roncaruthers/status/1249913913178611720

7. Sorry, Twitter has eaten this twice, so this is my 3rd and final time attempting this for today....so I'm posting in real time.

OK, first, Muni Bond are NOT tax free totally, because they count against your Social Security limits, and make you pay tax on that.

8. 529s are for college only, NOT retirement, and even those have a ton of problems.

So THEY'RE out.

That leaves a ROTH IRA and properly structured cash value life insurance.

Let's examine which is better....

9. We'll look at 3 areas:

-Contributions;
-Accessibility;
-And returns.

10. First, let's look at what you can contribute.

A ROTH IRA is a 'qualified' plan.

That simply means that it is subject to government rules and restrictions.

So, you can only contribute $6,000 if you are less than 50, and $7k if you're over.

11. AND, you can ONLY contribute if you make less than $139,000 as a single, and $206,000 if you're married.

With the life insurance, you can set it up to contribute whatever amounts you want.

BUT, the CATCH is that with a Roth, you can contribute whenever, with the life plan,

12. You have to contribute consistently for 4 or 5 years for it to be maximally efficient.

BUT, I have clients contributing $100,000 a year to those accounts.

And, in BOTH cases (ROTH and L/I) the money grows tax free AND can be withdrawn tax free.

13. Now, let's look at accessing your money:

With the Roth, you pretty much have to wait until retirement age to get at it, though there are some exceptions.

You can read them here:

schwab.com/ira/roth-ira/w…

14. With the Life Plan, you can access the money whenever YOU want, even BEFORE retirement age.

Generally in the 2nd or 3rd year.

AND, you get to access it tax free,

AND put it back to have it continue to grow.

15. So I use this a ton personally (yes, I have money plenty of other places as well)

so I can access it to grow or invest in my business or other opportunities.

In fact, it's even called An Entrepreneur's Roth, BECAUSE of the ability to use it to grow your business.

16. And, this is something wealthy families, banks and corporations have been using for years to fund their family or business 'banks.'

You can do the same.

Again, ACCESS is a HUGE deal.

17. Now, let's look at return:

BOTH offer you the opportunity to earn competitive returns, but the life account does something no investment company can do:

-Protect you from the DOWN side of the market.

Watch this:

Here is the S&P 500 from the last 20 years:

18. You made money, but everytime the market lost, so did you, and you often spent YEARS getting it back.

Because of the power of Indexing, you can get the upside of the market, with NONE of the downside:

Your gains are LOCKED in each year, and the WORST you get is a 0 return.

19. Better still, each year when the market loses money, your indexes reset and start over, so if they go up, you get to make NEW gains on your money.

While other people are JUST trying to get back to break even.

20. Seriously, just look at the chart below illustrating this and tell me which line YOU would choose:

The Green or the Red?

The Green didn't MAKE money during the down years, but it didn't lose it either.

21. THAT is the power of indexing which only an insurance company can do.

Should you do this with all your money?

Of COURSE not.

BUT, just like you would diversify your portfolio in terms of investments, you should also diversify your investments in terms of how they're taxed.

22. And, to recap, you get greater control with when and how you fund a life account,

You get access to the money BEFORE retirement,

And, you can be protected against the downside of the market.

@daveramsey didn't tell you ANY of that, did he?

23. So, is this right for you?

Maybe, maybe not.

BUT, you shouldn't rule it out because you 'heard' that it's bad.

If you can get access to your 401k or IRA, then this is certainly worthy of your consideration as a strategy.

24. If you want to learn more, my team and I put together 13 videos to teach you more about this and other financial concepts.

If you haven't signed up for them, you can do that here:

ducerus.provenwealthstrategies.com/free-access

Oh, one last though here.

This is from the former comptroller general of the United States, David Walker.

He believes the government will have to DOUBLE taxes in the near future.

Your 401k and IRA are at risk. Consider getting the tax over with now.

26. Thought. 👆

OK, this took way longer than expected because Twitter has sucked today.

Sign up for those classes if you haven't, I'll answer questions later (I'm OUT for now),

And you know where to find me if you have questions or want to see what this looks like for you.

27. I'll get the salmon recipe out later tonight or in the am.

It would have been today, but I didn't plan on how long this was going to take.

/end