116 3rd St SE
Cedar Rapids, Iowa 52401
“Nothing is certain except death and taxes.”
Benjamin Franklin’s statement still holds true today as it did over 230 years ago. As taxpayers we must each pay our fair share in taxes, but no one said that we had to pay more than our fair share. With Tax Day behind us, some of us want to have a tax plan so we don’t encounter the same tax headaches next year.
As taxpayers, we know there will always be taxes that we will have to pay. Some examples of taxes that we pay are income taxes, Social Security Tax, Medicare Tax, sales tax, and property tax.
Although taxes are for certain, the uncertainty is where will they go in the future. With the current status of our economy and our debt as a country, there is only one direction for taxes to go and that’s up. It’s not a matter of if they’re going up, it’s a matter of when. Will you be prepared before this happens?
Where do most people have the bulk of their assets? They’re in pretax accounts such as a 401(k), 403(b), 457, and an IRA. Pretax means that taxes have only been delayed to sometime in the future. Do we know where taxes will be in 5 years, 10 years, or 20 years? No. This is what we call a ticking time bomb. Not only are the contributions taxable, but also the entire growth. As a result of taking deductions through the years to save a few dollars on taxes, 100% of the account balance will be subjected to the uncertain future tax rates. By delaying taxes over the years, your account balance will be less than if you had paid taxes on the front end.
Living in Iowa, it’s quite easy to illustrate this. Would the farmer rather pay taxes on the seed or their harvest? Most likely it would be agreed that paying taxes on the seed would be the most sensible. However, this is not what many are doing if they are contributing to the pretax retirement accounts. These people will pay taxes on the harvest. We are in one of the lowest tax environments, so we should not be deferring taxes except to receive the full company match.
A perfect tax plan would include contributions that are tax deductible, tax deferred growth and tax-free distributions. There is no plan that includes all three of these features. One must choose between tax deductible contributions and tax deferred growth or tax deferred growth and tax-free distributions.
At Safe Money Solutions, we offer a holistic approach when working with clients. We find solutions that mitigate or eliminates taxes on assets. One type of plan that we use is a specialized designed life insurance that allows tax-free growth, tax-free access to account value and provides a tax-free death benefit. Our planning includes transitioning from a taxable asset environment to one being tax-free.
At Safe Money Solutions we educate clients on concepts and the security that this type of planning provides. There is nothing more valuable and powerful than having tax-free assets. The types of accounts we use are protected from market risk and can never lose money. We want our clients to grow their assets safely and keep more of their money in their pocket.
At Safe Money Solutions, we are not financial advisers or tax consultants, therefore the information presented in this article should not be constituted as financial advice or tax advice. Financial advisers advise where to invest assets that in turn are subjected to market gains and losses. We protect assets by placing them where they can grow safely. We are insurance brokers.