The Prosperity Gap Podcast

In this episode I am going to be talking about rental real estate, and the top 5 reasons why I believe you should not own rental real estate in retirement if you're trying to get to a tax free and risk free retirement. And I will end the show today by sharing my best recommendation if you decide to go against everything I tell you today, and invest in rental real estate anyway. 

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This week I'll be talking about the last five scams on my list. It's important to understand some of the top internet scams that exist. So hopefully you can keep yourself safe and secure. 

The most popular scam of them all is what is called phishing. Now this isn't the type you do with your grandkids out of the lake, but it's called phishing starting with a ph because it resembles the other type of fishing you do with a rod and reel. Essentially fishing is cybercriminals reaching out to you in hopes that they can get you to disclose or give them access to your information...

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Part 1 - The Top 10 Elderly Fraud Scams and How to Avoid Them

Every one of us here on the show is susceptible of being taken advantage of by con artists. But as we age the problem is magnified. Over the next two podcasts I'll be talking about the top 10 elder scams that exist. 

Let's take a minute to talk about why scamming the elderly has become so popular. The biggest reason is because those doing the scanning have found the older segment of our population is an easy target. What these con artists have found is that they can easily manipulate this segment of the population because many of the elderly are lonely, and they're not as mentally sharp as they used to be. Both of these two weaknesses can be easily exploited by someone who does not have your best interest in mind. 

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What is rule 72(t) rule 72(t) is a section of the IRS code that allows for penalty free withdrawals from your traditional retirement account prior to age 59 and a half. 

This means that those who are wanting to retire early or who want more freedom to transition assets out of their tax deferred bucket into their tax free bucket prior to age 59 and a half can do it without having to pay the IRS the normal 10% early withdrawal penalty. 

But as with anything the IRS offers, there's a number of rules and regulations one should know before they take the plunge and start taking advantage of the loss surrounding the 72(t). 

I'll be covering the top 10 things you need to know about a 72(t)

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Getting to a tax free and risk free retirement may be one of the toughest things you will ever have to do, but the process will be much easier if you know the rules. 

I'll be sharing with you the 12 rules of a risk free retirement plan. 

#1- Everyone's retirement situation is different.
#2 - You're not likely to be in a lower tax bracket in retirement.
#3 - There's an ideal amount to have in the taxable and tax deferred bucket in an environment where tax rates are rising.
#4 - Anything above the ideal balance in the first two buckets should be systematically moved over to the tax free bucket.
#5 - Anything with the word Roth in the name is your friend.
#6 -  The best way to deal with long term carry bed is with a life insurance retirement plan.
#7 - Social Security taxation is a big deal.
#8 - You will need more than just one stream of tax free income in retirement.
#9 -  Know your magic number.
#10 - You want to have your heavy lifting done before 2026.
#11 - Never annuitize your retirement at the tax deferred bucket.
#12 - It's better to have help when trying to get to the zero percent tax bracket.

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I'll share with you five takeaways from the power of zero paradigm. This paradigm is based upon the belief that taxes will be higher in the future and the best way we can insulate ourselves against the time of higher taxes is to do appropriate planning now, so we can eliminate tax rate risk in the future. I will provide you with a warning though, and that is that the first few takeaways are going to seem a little depressing. But if you'll stay around until the end of the show, I promise you that you will end up with some great news at the end.

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In today's show, I'm going to be answering a question that far too many retirees don't know the answer to and that question is, "What is the correct withdrawal rate for my retirement?

The question regarding withdrawal rates and retirement dates back decades. Since traditional retirement plans were brought about in the 1970s people have wanted to know how much money they could withdraw from the retirement and have it last until they passed away. In the mid 1990s, it was assumed that based on life expectancy and current returns in the market, a retiree could take around 7% per year and still be okay. But there was an individually started questioning this logic. He was a native in New York who was born in 1947. He got a Bachelor of Science degree in aeronautics and astronautics from MIT. He worked for 17 years with his family owned soft-drink-bottling franchise firm in the new New York metropolitan area. The company sold in 1987, which is when he decided to become a financial advisor. His name is William Bengen. William started using what is called the Monte Carlo method to help determine the probable outcome of people's retirement plans based upon certain withdrawal rates during the mid 1990s....

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Is Social Security really going broke? The short answer is yes. Before you go tell all of your friends I told you, so. I recommend you stick around because although Social Security is going broke, it will never be broke. 

Possible solutions that can be taken to make Social Security is financially sustainable for the foreseeable future.

1- Raise the amount of taxes employees and employers are contributing into the program

2- Move full retirement age from between age 66 and 67 to age 70

3- Make all W2 earnings subject to the Social Security tax

4- Change the program into a welfare program

5- Decrease the delayed retirement credits

6- Delay eligibility from 62 to 64

7- Reduce the family benefits

8-  Reduce annual COLA increases

I don't know which of the changes I've talked about today, the government will choose to implement to solve the financial issues Social Security will have in the future, but they will choose one of them or a combination of them not because they want to, but because they have to in order to stabilize the program. 

Hopefully now you have a better understanding of my comment from the start of the show where I said, "Social Security is going broke, but it would never be broke". It's my belief that Social security will continue to be a critical part of a well planned out retirement and that we can count on it to be there for decades to come. 

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David McKnight joins Dave on the podcast to talk about tax free income for life. 

Our country is facing a crisis. We're essentially on an unsustainable fiscal course and every year that goes by where Congress fails to right the ship as a means the fix on the back end is going to be just even more draconian, even more aggressive and even more uncomfortable for Americans who are likely going to have to deal with the consequences of it come 2030 and beyond. 

I started to really build my own story around the fiscal condition of our country and what the 78 million baby boomers can do to protect themselves from the impact of higher taxes that will invariably result from all of the debt that we're that we're in the process of accumulating....

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