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Will Taxes Increase? January 11, 2010

Posted by Jeff Nabers in : Hyperinflation, Money, Uncategorized , 1 comment so far

taxes

I was just listening to a recording of a conference call this morning where a financial planner began his presentation with this premise:

Taxes will be increasing in the future

I haven’t listened to the rest of it because I had to pause it and write this post. I’m sure when I go back this guy will paint a whole picture based on the assumption of taxes increasing in the future.

Really?

Maximum Taxes

Well, first, let’s admit to ourselves that there is a very real, hard maximum taxation point. That’s 100%. A taxpayer cannot pay more in taxes than he has. Beyond that is impossible.

Second, let’s admit that there is effectively a maximum taxation point that is well below 100% of what a taxpayer has. Taxes going beyond this point is improbable. Let me explain…

Whether you may realize this or not, you probably pay 60%, 70% or more of every dollar that has ever been “yours” in taxes. Income taxes, property taxes, sin taxes (on booze), gas taxes, sales taxes, excise taxes, franchise taxes, death taxes, etc. Some of these taxes show up on paper that you can see, and some of these taxes are never declared to you at the point at which you pay them.

Where the Line is Drawn

So with the majority of the money that was ever yours already going to these direct taxes, how much more taxation can you take? Imagine a scenario where we go from systematically losing 70% of our money to losing 90% of our money.

Do you think hundreds of thousands (more…)

Bail Yourself Out May 7, 2009

Posted by Jeff Nabers in : Money, Self Directed IRA Solo 401k , add a comment

My new article on Forbes.com…

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For entrepreneurs, getting through these financially turbulent times may require some imaginative [read whole article on Forbes.com]

Penalty Free Early Distributions May 23, 2008

Posted by Jeff Nabers in : Money, Personal Enjoyment, Self Directed IRA Solo 401k , add a comment

Probably one of the must unknown facets of retirement planning is that you can distribute before age 59 ½ for any reason without paying the extra 10% early distribution tax. How?

Substantially Equal Periodic Payments

  1. Set a distribution schedule calculated using IRS tables
  2. The schedule must have regular payments of a certain consistent amount.
  3. You must make receive these distributions from your retirement account either until you reach age 59 ½ or for a 5 year period… whichever is longer.

Internal Revenue Code Section 72(t) is where the extra 10% tax for “early distributions” (before age 59 ½) is imposed. However, if you read on to IRC 72(t)(2)(A)(iv) it is explained that the 10% tax is not applicable to any distribution that is part of a series of Substantially Equal Periodic Payments – or SEPP for short.

To give you an idea of how this works using calculations from IRS life expectancy tables, let’s examine a fictional case study with round numbers for simplicity:

Jared is considering early retirement at age 45, and over the years he has grown his IRA to an asset value of $2,000,000. He isn’t sure whether he wants to completely retire, work part time, pursue a career change, or start a new business. Let’s take a look at his options… (more…)