Some people have a concern about the implications of the tax arbitrage they could be receiving if they just waited. This is the key to the Roth plans and Life Insurance vehicles that Ed described.

The big myth is that you will be in a lower tax bracket when you retire. If you let your IRA just continue to grow, at age 72 the plan will be out of your control, and you will be forced to take the money out at the prevailing rates, whatever they are at the time, for the rest of your life.

For married couples, there is another problem they don’t think about, and that’s that one spouse usually dies first. This means the surviving spouse becomes a single taxpayer again. This means they will have the same assets and income but at much higher rates.

If you don’t pay the taxes now, there will always be uncertainty. If you lock them in now, you will never have to worry about taxes again.

Most retirees don’t suddenly begin spending like rock stars. If your single child inherits a million dollar IRA, they are going to be forced to realize it as income over the course of 10 years when they are probably at their highest earning potential, at a period of time when they can least afford to pay the taxes.

If you don’t need some of your money in retirement, doing a Roth conversion on that money is like a gift to your children and grandchildren. You can give them a tax-free account which can be coupled with a tax-free life insurance plan to maximize the benefits.

We are in a period of historically low tax rates, and in a rising tax rate environment, it only makes sense to pay the taxes now and get the money moved to tax-free. Yet 90% of all retirement dollars are in tax-deferred accounts.

Most people believe that tax rates are on the rise, yet still have the majority of money in tax-deferred accounts. The secret to having more later is to pay the tax now. All the good things in life you pay for upfront, but it’s the bad things that you defer that end up costing you.

If you take care of the problem early, you have less to worry about. Like spending money on dental care, waiting until the very end makes the problems more painful and more expensive.

Covid has led to people running to their estate planners. It has put more attention to making sure people have a plan in place in case they die or get sick.

When you combine that with the additional $3 trillion dollars in debt the US government has accumulated, we are going to have to face the day of reckoning much sooner than we thought.

Just like stocks, with taxes we should buy low and sell high. Right now taxes are low, and they may never be this low again in our lifetime.

A good analogy is like paying off the mortgage to your house. When you finally make that last payment and own your house free and clear, it’s a great feeling. You can get that same feeling by paying the taxes now and owning your investments tax-free forever.

You can do everything right when it comes to your IRA. You can build and save and invest well, but if you don’t protect it, all your family will remember about you is that you blew it.

The people with the most money want the best trained advisors. Ed has several opportunities for advisors to learn how to help people keep more of their money and other tax planning technologies.

All people want larger inheritances, more control, and less tax. You control your rate and which advisor you work with. Only invest with an advisor that invests in their education. The problem with the tax rules in the tax code is that they are rigid and unforgiving. You need to get the right answer the first time.

 

Mentioned in this Episode: The New Retirement Savings Time Bomb by Ed Slott can be pre-ordered on Amazon here: https://www.amazon.com/gp/product/B07TSZSSY5/ref=dbs_a_def_rwt_bibl_vppi_i0