1. Your 401k sucks beyond the match because you are postponing paying taxes on it AND on EVERYTHING THAT IT EARNS.

And, you're postponing the calculation of the tax.

So, what should you do instead?

Here are 3 solid options:
2. First, a Roth IRA is a solid choice.

With a Roth, you do not get a current year tax deduction, BUT...

...your money grows tax -free AND after 59 1/2, you can withdraw it tax-free.

Also, you can access what you contributed without penalty or tax at anytime.
3. You can also pull $10,000 from a Roth IRA without tax or penalty for the purchase of your first home, as long as you've had the account for at least 5 years.

And the definition of 'first home' simply means you have not owned a home in 2 years.
4. Another solid option (if it is set up correctly) is cash value life insurance.

Did you know THAT is where Congress got the idea for the Roth IRA in the first place?

Well, now you do!

The wealthy, not-so-wealthy, politicians and corporations have used this for years.
5. It works like a Roth IRA in that you contribute money AFTER tax, but it grows tax free, you can withdraw money tax free, and the death benefit is income tax free.

AND, it has several advantages that a Roth IRA does NOT have.

Here are 3 of them:

-You can contribute as much as you like, although there are some restrictions in HOW you fund it.

But I have clients putting as little as $150 a month into these and as much as $100,000 a year.

The 2nd benefit is you can withdraw money at ANY time without tax or penalty.
7. And the 3rd benefit is that you can get the upside (or most of the upside) of the stock market with NONE of the downside....

..each year, your gains are locked in no matter what the market does the following year.

And, the worst you earn of 'MY' kind of these accounts is 0
8. We use this as an alternative to 401ks all the time in my office for contributions above the match OR for where a client doesn't have a retirement plan through their work.

And, we can create a lifetime tax free income out of these that you literally canNOT outlive.
9. If you've been listening to @daveramsey on this, it's time to stop.

Or at least check out for youself and see what Dave might be hiding from you.

Here is an example of one we set up for a client set side by side with a 401k.

10. BTW, what I forgot to mention in the thread above is that we 'grossed up' her 401k contribution.

In other words, when I ran the math, I actually had $16,667 going into her 401k vs $12,000 into her life plan since the 401k contributions are pre-tax vs the LI which is after
11. So, the illustration really is a very fair comparison.

Oh, and for those of you that think you're paying less in your 401k, so

mY ExAMplE sUcKS because I used a 1.5% expense ratio, here is a white paper I wrote on the subject showing that that number is probably LOW.
12. Here is the link to THAT monstrosity of a thread (but it's really informative, or so I've been told)

13. If you want to learn more about how this type of account works, reach out to make an appointment and we'll discuss if this makes sense for you or not.

Hit info at roncaruthers dot com
14. Finally, instead of a 401k, you could open up a good old-fashioned brokerage account.

If you hold individual stocks or growth-style mutual funds, your taxes on your gains there may be 0 also. if you hold them at least one year.
15. Yep, right now there is a '0' long-term capital gains bracket for singles that make $52,400 and Married couples that make up to $104,800.

So, in summary, the government is a TERRIBLE business partner.

They don't help you with your job or business, but they want a cut.
16. And for most of you, having all or even most of your money in Traditional IRA's or 401ks is a terrible place to put your money.

And we didn't even talk about the biggest reason why, besides that taxes you'll pay:

You really don't have access to that money for decades.
17. So, as you review your financial situation for 2020 and 2021, be sure to explore these other avenues to keep what you pay your 'partner' to a minimum...

...or better yet, NOTHING.


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More from @roncaruthers

16 Dec
1. How to know when it's time to quit your day job and go full time on your side hustle.

My thoughts.

I got asked this yesterday, and here is the formula I've used with clients that seems to work.
2. First, I recommend that you make AT LEAST 2x your day job income before even THINKING about quitting.

Yes, you can do it on less, but remember: right now, you're getting a steady check while you make side money, so it takes a lot of pressure off of you.

That will change.
3. Also, you are probably going to have to pay more in taxes, and cover your health insurance, so you'll NEED to make more money to take care of those things.

That's why I recommend 2 times your day job income.

Also, unless you work for a start up, you check has been steady.
Read 6 tweets
9 Dec
1. Will you get audited if you employ tax savings strategies, like @WCarlRussell is concerned about.

It's a pretty rational concern.

In fact, the IRS COUNTS on enough people having this fear so that they do NOT try anything.

However, how real is it?
2. First off, your odds of getting audited statistically DO climb if you add self employment income OR losses.

But, they climb from a .8% chance each year to a 1.2-1.4% chance each year.

In other words, about 8 people out of 1,000 get audited, vs 12-14 that own businesses.
3. So, the odds are WAY in your favor that nothing ever happens.

And there are things you can do like filing at the last minute that seem to improve those odds in your favor.

However, the SECOND point is even more important than the first:
Read 8 tweets
8 Dec
1. How to write off your next mattress or hot tub. (yes, hot tub)

First off, this thread is for business owners.

BUT, you should read this even if you do NOT have a business..so you have some idea of what I mean when I say that the tax laws were all written for business owners.
2. With this strategy, here is just SOME of what you can legally deduct:

-air conditioning

-a mattress (those suckers are EXPENSIVE!)

-hearing aids

-a pool

-a hot tub


-weight loss programs,


Now, HOW do you do that?

Read on:
3. What you need to set up is a Medical Reimbursement Plan, also known as a 105(b) plan.

It is NOT a typical insurance plan.

It is a legal fringe benefit plan that permits you to claim FULL deductions for reimbursing your employees (including spouse and family) ...
Read 36 tweets
5 Dec
1. Have you refinanced your mortgage yet?

Rates are still as low or lower than I've ever seen them.

Recent example: one friend of mine's parents refied their mortgage from 4.5% down to 2.5%.

The payment went from $1,700 a month to $1,300 a month.
2. So even though they added 4 years because their mortgage had 26 years left and they refinanced to a 30 year,

if you run the math, they STILL are saving $61,400.

Even AFTER adding 4 more years to the mortgage.

3. If they invest that difference of $400 a month at 7% (easily done over a long term with even index funds, though there are better places IMHO)

They will have...

....wait for it.


NOT a typo.

Read 11 tweets
3 Dec
1. Since it is year end, now is the time to check the beneficiaries of your stuff....life insurance, brokerage accounts, trusts....things like that.

Making sure your ex-wife/husband is NOT the beneficiary of your life insurance is step number one!
2. I'm not a lawyer, and I don't play one on TV, so you should seek competent legal advice and not listen to really anything else I say in this thread, etc, etc

BUT, if you choose to stick around, here are some things to watch out for.

You know, from your non-lawyer friend Ron.
3. So first off is to make sure who you want is correctly listed.

And usually that should NOT be your minor children.

In most states, a minor child can only inherit between $5,000 and $10,000 directly without involvement from the court.
Read 11 tweets
29 Oct
1. Little known IRS relief just for the asking!

If you're new in business, it is really, REALLY easy to get behind on taxes.

However, there is a little known rule called 'first time abatement' where they will waive the penalities IF you ask:

No reason required!
2. Here is how it works:

If you get behind on filing your taxes, they can assess you up to 25% in additional penalties

AND ANOTHER 25% for failing to PAY the tax.

However, you can request a 'First Time Abatement' without giving a reason as long as:
3. This can apply to Failure to File, Failure to Pay AND Failure to Deposit (if you have employees).

You can request this simply by making a phone call to the IRS and requesting First Time Abatement, and it will most likely be granted if you meet the following criteria:
Read 5 tweets

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