What are your income tax rates in retirement gonna be? Though we can’t be specific, of course, we can know if they’ll be more or less.

Download Audio

 

Transcript:   One of the myths – and it’s a myth according to my opinion – about retiring and the income rates that you’ll be charged is the wisdom of the ages coming from way of Wall Street where the advisers will tell you at work that you listen to for your 401k, they’ll say “Well John, we have found that those when they hit retirement, they don’t have to worry about taxes because they’ll be in a much lower, marginal rate. It won’t matter that much.” Then people just go on their merry way thinking wow, that’s really good. I have to worry about taxes now but I won’t then. Stop and think what is the only plausible reason you would be paying at a lower rate. Ah, I just saw the light go on. It’s because you’re making less. Well if you’re making that much less, wouldn’t you rather be paying the same rate you were? Because now you’re making more in your netting more. Here’s the thing, and I’m going to make this into a nutshell because I have been challenged by the Wall Street believers and advisors my whole career. They always stop when I say this. The only reason people with 401ks retire so poorly is because for the last 25 to 40 years they’ve been listening to that advice. If you got a million dollars in your 401k when you retired, and then that makes you hen’s teeth rare. People just don’t do that. You know what the average 60-year old man in America has in his 401k today? Not six figures, much less a million. Let’s say you retire with a million bucks. They’re going to tell one of two things. You’re either going to make a yield of about 4% a year or you’re going to be taking out enough to live on comfortably and then the million’s gone. Don’t live too long. Now imagine you spent 25 to 40 years amassing a million dollars in your 401k at work. You’re thinking man, I’m in the deep end of the pool; this is cool. Then you find out because you’re now not looking to see how much risk you can have in your investments. You’re clearly risk-averse as you should be in retirement. Now the same advisors, they tell you you’re going to make about 4% because you’re not trying to be risky. Right now the ten-year treasury is under 3% so let’s say you do get the 4% somehow. That’s 40,000 dollars a year before taxes. Are you telling me that you’re getting something that is a little bit higher than social security by 10 or 15,000 dollars a year and that you scrimped and saved and sacrificed for 30 or 40 years for that? Really? No you didn’t. We both know you didn’t. What you did was hope to qualify for a nice retirement where your home was free and clear maybe, you had enough cash flow through two or three different sources, and all of your sacrifice and investing that you can take the occasional two or three week vacation to another land. You can visit your grandkids anytime you want, do anything within reason. When you invest in real estate and just let time do its deal, you’re not trying to be fancy, you’re not being aggressive, you’re not even expecting appreciation, I’m here to tell you if any real estate you ever bought never went up a dime in 40 years you’ll have more cash flow than that million dollars would in your 401k period, end of sentence. Because over time … For instance, if you just bought four little duplex in East Toilet Seat, Texas and you spent your entire retirement money not on a 401k but just in retiring that debt, and that was your whole plan – it’s my con...