Your Wealth Reserve: Another way the wealthy avoid taxes we can’t

Can you take out 10% of your nest egg each year?

Some baby Boomers think their advisors would recommend this amount to be withdrawn each year in retirement. “Today’s low yields on bonds and high equity valuations mean ‘retirees are unlikely to receive returns that match those of the past,’ Morningstar says.” Fidelity said that over the timeframe of about one century, a 4.5% withdrawal rate would have lasted throughout a 30-year retirement in about 90% of the periods analyzed. Because that is an average, you must consider your specific situation before assuming you can spend 4.5% each year. Low earnings, inflation, your health and your family longevity must be factored into your best case scenario. If the bulk of your retirement funds are in qualified accounts (traditional IRA), your mutual fund or brokerage firm uses the IRS RMD worksheet to do the calculation for you. Their tables use an average withdrawal rate of less than 4% of your previous year’s combined total qualified funds amount each year. Thus, if your investments shrank, your RMD amount will be lower. You need to learn the factors that change your prudent annual spending amount.

Learn more: https://www.amazon.com/What-your-RMD-much-spend/dp/1718946716

Help your child, grandchild get started on a $1 million fund

They will need a million dollars since inflation can reduce the buying power by 50% in just 20 years. Since common stocks have the best history of keeping ahead of inflation, a broad portfolio has the best chance of delivering steady returns. Since 1871 a basket of stocks (dividends reinvested) has provided 11% returns. Ordinary inflation is 3% not 8.6%, so right now stocks are cheap. If you show your family that an 11% long-term return can turn $250 a month into $1,000,000 in about 34 years, they will not be try to beat the market with fast trades through a $0 commission broker. Show them the math: $250 per month for 34 years costs $102,000 in contributions. They earn $898,000 in dividends and capital gains. If they use their special IRS tax-FREE account, they avoid about $225,000 in taxes when they take their money out to live on. Remind them that Warren Buffett bet a million dollars on a low-cost market index fund to beat 5 super stock pickers. Buffett recommends you use the Vanguard 500 Index Fund. Why? You can give up 63% of your returns when you use a broker. And if they trade to beat the market they may end up with the historical broker account average of 3.79% not 11% a year. That’s $208,865 instead of $1,021,768 after 34 years.

https://www.amazon.com/Give-your-child-leg-up-manage/dp/1096505355

Quickest ways to save $3,000 a year

The Federal Reserve's 2019 Survey of Consumer Finances (released in 2020) found that the average, or mean, account was just over $255,000. The average cost of using an advisor or broker was 1.5% a year or $3,825. Since most financial sales people can NOT guarantee higher performance than the actual markets, most of us are better off leaving our money in a low-cost index account. Managed accounts earn only 3.79% vs 11% for an index account. For specific money management solutions, a one-time fee-only planner provides better advice since it is unbiased. Moving accounts is easier since a trustee to trustee transfer is usually free and not a taxable event. Another way to save $3,000 a year is canceling a loan to the US government. The average tax refund was $3,304. You will not incur a penalty if you owe less than $500 each year. So if you reduce your paycheck withholding by $250 a month, $125 a pay period, you will be able to increase your investment account by $250 a month. This creates $3,000 a year or about $200,000 extra in your investment account in 20 years.

https://www.amazon.com/New-American-Retirement-System-Reserve/dp/1461030072

Cutting recurring costs can save you a fortune

During this period of high inflation, it is important to note how much certain expenses really cost. Just as I noted above, saving $3,000 a year on your money management can really put huge amounts into your account. One reader was paying 2% of their nest egg each year for their advisor to check their statement quarterly. They moved their money to Vanguard and accumulated an extra $350,000 during their pre-retirement years. They were not only giving away 2% a year, they were losing the gains from that money. This “tyranny of compounding costs” applies to all of our recurring costs. We used to pay extra insurance premium for collision coverage on all our vehicles. We paid $ hundreds year after year until we realized our coverage would NOT pay enough to repair our older cars. This fact led us to take our policy apart so we paid only for the liability required by law. We did not need standard mileage, collision, comprehensive, gap, towing, temporary rental, health care, disability, accidental death, dismemberment, personal injury protection (PIP) and uninsured motorist coverage (UM). We then went through all expenses—cable, internet, life insurance, periodicals, etc to find more savings.

Save big: https://www.amazon.com/Get-What-You-Pay-financial/dp/1492384100

Another way the wealthy avoid taxes we can’t

One of the easiest ways the super rich can avoid taxes is by having the assets they donate to a tax exempt organization appraised for very very high amounts. Today Trump’s favorite property appraiser was asked to stop holding up the investigation by the New York Attorney General. Trump took a $21 million tax deductions on his tax returns by having his appraiser value the forest in front of his mansion in upstate New York so high: it’s impossible by law. Our Congress people let folks like themselves reduce their taxes by claiming a deduction for their $million gifts. They give art, land, houses that they have appraised at future or improbable values. Trump promised he would not develop the forest on his property in his retirement years. That development is not possible. This is one reason Trump is under investigation. His appraiser based the value of his property on the possibility that 24 mansions would be built and sold. Local officials have laws against such a venture. Rich people in the area don’t want the ‘low-life’ crowding the back roads and markets. So if the appraisal was faked, Trump will owe New York and USA millions of dollars. Trump’s lawyers may delay paying for years. He may end the IRS probe in 2024. Meanwhile, don’t pay the shortfall for the rich.

Use your tax-Free IRS account: https://www.amazon.com/Tax-FREE-Wealth-How-laws-free/dp/1475089236

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