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Honest Takes:
00:15 – Don’t Forget Your Taxes.
According to the Motley Fool, one of the most common retirement planning mistakes is forgetting about taxes. Unless you work with a tax professional and incorporate tax strategies into you financial plan, you could find yourself paying up to Uncle Sam upon retirement. Many folks think their taxes will drop in retirement, but they could actually go up. Taxes are confusing, and it’s easy to assume your CPA is taking care of you, but that isn’t necessarily the case. You need to wise up, and build a specific plan for approaching taxes in retirement.
1:15 – What’s Taxable In Retirement?
Depending on which tax bracket you’re in, your Social Security could be taxed. In fact, up to 85 percent of your benefit could be taxed. Your qualified retirement accounts could be taxed as well. If you’re invested in a traditional IRA, you’re going to have to pay the taxes on any gains you’ve earned on your initial tax-free investments through the years.
3:30- A Recent Example.
We had someone to come in with money invested in taxable, tax deferred, and tax-free accounts. However, most of their money was invested in brokerage and traditional IRA accounts. They were going to have to pay large amounts in taxes once they began taking their required minimum distributions. Basically, their current advisor had been inefficiently managing their portfolio. Furthermore, their CPA was only putting together their tax return. This person had the goal of donating their money to charity. Instead, they were giving most of it to Uncle Sam. Don’t forget, there’s a big difference in tax filing and tax planning. A tax plan for their wealth would’ve gone a long way toward helping them maintain control of their money.
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Honest Takes:
1:23 – What Is A Roth 401(k)?
A Roth 401(k) is a qualified retirement account that allows you to pay taxes on your initial investment rather than any gains you incur. Think of it this way. A farmer plants a seed in order to later reap a harvest. In the same way, you invest your “seed” now, and your initial investment multiplies through the years into a financial harvest of sorts. You’re going to have to pay Uncle Sam one way or another, and it’s cheaper to pay the taxes on your seed than it is your harvest. If you’re able to pay your taxes up front, you stand to make more long-term.
1:32 – What Is A Traditional 401(k)?
A traditional 401(k) allows you to invest tax-deferred. This can be as plus as it enables you to save more up front. However, when you invest in a traditional 401(k), you’re committing to pay the taxes on your previously mentioned harvest. While you can maximize tax savings now, you’ll most likely pay more in taxes later. Just think, it’s a lot easier to pay the taxes on a $20,000 investment than it is a $200,000 account when it’s time to withdraw your money.
2:55- What’s The Same Between The Two?
There’s still a limit to how much you can contribute into a Roth 401(k). If you’re under 50, you can only contribute $18,500 a year. Additionally, if you have both a Roth 401(k) and traditional 401(k), you can still only contribute a combined $18,500. You don’t get to do that in each account. There’s also a catch-up contribution limit if you’re over 50. This allows you to make up for lost time while you’re still in your peak earning years.
We live in an age of unprecedented entrepreneurship – see Apple and Amazon. Brian shares advice for entrepreneurs wanting to invest in the next big company.
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Honest Takes:
00:15 – Entrepreneurs: We’ve All Heard Of The Success Story.
Entrepreneurs like Steve Jobs and Jeff Bezos each got their start with an idea for the next big thing.
They worked hard, and with a little bit of luck along the way, they launched two of the most valuable companies on the planet.
If you invested in either of those companies at their start, you’ve probably done pretty well. However, you can rarely count on the magic investing bullet.
2:00 – Is The Bull Run Here To Stay?
The short answer is no. That’s why we call it a bull run. The bulls can’t run forever. While we’ll certainly take advantage of the bull market while it’s here, we need to plan for a market correction at some point in the future.
When the bull run comes to an end, you need to preserve your money. Entrepreneurs are always going to have great ideas, but if you’re in your 60s, 70s, and 80s, you can’t afford to take the risk. You’re in what’s called a “preservation” stage of life.
4:57 – Who Will Be The Next Amazon Or Apple?
We don’t know, and that’s the point. There’s always going to be a winner amongst the great ideas. However, individual stocks always have a lot of risk attached to them. While the market as a whole will never drop to zero, an individual company can. That’s why it’s always important to protect your wealth and diversify your portfolio.
