Biggest Risk to Retirement


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Transcript

Mike:

What they’re trying to do here is get their foot in the door by only applying it to people with over $10 million, the rich, the rich guess what? The minute that this passes, if they get this to pass, guess what the next step is

Zach:

Going to be to slash that number down.

Mike:

That’s right. It’s like give an inch, take a mile.

Zach:

Welcome to Retirement Today. I’m your cohost Zach Holcomb and alongside me, we have Michael Reese. He’s a certified financial planning professional. And for the last 25 plus years, he’s been helping families just like yourself, secure their retirement. Mike, super happy to have you back on the show with me this evening. But before we dive into things tonight, how are you?

Mike:

Well, as always doing great. And I’ll tell you what Zach tonight I’ve got an article actually is kind of a, like a mini white paper. We’re going to talk about, and here we go, we’re going to be, you know, this is going to get me all red in the face, but we’re going to be talking about what they’re doing in Washington DC and how their actions might impact, you know, all of our listeners, retirement planning.

Zach:

Sure. I’m glad we’re bringing this up because this is something that’s really important to our listeners and viewers, and we probably don’t talk about it enough, right?

Mike:

Yeah. That’s right. So let’s, you know, I just want to dive in.

Zach:

Let’s go.

Mike:

Can I dive in Zach?

Zach:

Head first.

Mike:

Got nothing else for me before I dive in?

Zach:

Head first in the deep end.

Mike:

All right. So the title of this white paper, and this is written by someone, her name’s Becky Ruby Swansberg. She’s in, I think Louisville in the country here, but she used to work. She used to work for all the congress people and senators actually in Washington, DC. She knows these people really well. Yes. And this article it’s titled congresses $3.5 trillion spending bill and its impact on savers.

Zach:

Now 3.5 trillion with a T.

Mike:

Yeah, that’s with a T.

Zach:

Okay.

Mike:

Right. Trillion’s a big number.

Zach:

It’s a lot of money.

Mike:

It’s a lot of money. So yeah, I mean, I think sometimes my children think that my bank account has a T after it, after the dollars, but I, you know, my bank and I agree that it’s not that big, not a T. So here we go. And I’m just going to kind of read this to all of you as it starts, because I think it’s important. It says Congress is currently debating. So if you’re paying attention to the media, Congress is currently debating a three and a half trillion dollar tax and spending package as part of president, Biden’s build back better agenda. Now, before I go any further, I’ve got two things to say, number one, let’s read this again. Congress is currently debating a three and a half trillion tax and spend yeah. What does Congress do better than anything else? Take money away from us and then spend it on their special interests.

Mike:

Light it on fire, right? Yeah. It’s like you guys, I mean, this is why I have such low. I, I put a, a, a politician like below lose, used car salesman and somebody I can trust. All right. So we got that. And what is the name of this it’s by president? Biden’s a build back better agenda. Now, Zach, a couple of weeks ago we had Ed Slott, America’s- I apparently he could be America’s IRA expert. We talked about how we can’t be experts anymore. But anyway, he’s a CPA. That’s really, really smart when it comes to IRAs and tax planning. And he made a fun comment about whenever Congress has a bill and they give it a name. Do you remember what his comment was?

Zach:

Refresh my memory.

Mike:

Yeah. So here’s what he said. He goes, you ever notice how every time Congress comes up with a bill that whatever they call it at the end of the day, the outcome of that bill is the opposite of what they, you know, of, what they name it.

Mike:

Like he referenced a, there was a, you know, back in the day, there was one of these bills talked about, you know, a tax, you know, some kind of tax act that was all about, I can’t remember the example, but he talked about how it was about making taxes responsible, right? Some kind of tax responsibility act,

Zach:

Sounds like they’re doing good.

Mike:

And it was the exact opposite of what happened. No taxes just got more out of control. Right? So here we’ve got an act or something they’re working on called the build back better agenda.

Zach:

It sounds so good.

Mike:

It sounds so good. But at the end of the day, it’s probably going to be the opposite. Right? So anyway, I thought that was funny anyway. And by the way, here are the special interest groups that the that the Democrats want to reward with this three and a half trillion dollars, they said Democrats would add three and a half trillion dollars in new spending for expansion of here we go, healthcare.

Mike:

They want to expand Medicare, which is already $33 trillion in the hole of the biggest Ponzi scheme of the world. So let’s make it bigger. Why not write a family, leave climate change initiatives? How exactly is us giving more money to Washington D.C. Going to help with climate change the answer, not one iota, but they thrown that in there. And of course more right now, this is the part that’s really important for tonight. Show naturally to fund this new spending. This bill also includes a multitude of new and expanded taxes on individuals and corporations significantly. The bill includes multiple tax provisions that impact IRAs 401ks, you know, 403b’s, 457, Roth accounts, you know, and similar now at a high level, this bill represents a significant change in the way Washington views saving for retirement. The house Democrats. Now listen to this. They stated one global legislation is to avoid subsidizing retirement savings. Once account balances reach certain levels. So with this bill, Washington has shifted its focus. This is so important. They’ve shifted their focus from incentivizing Americans to save for the future to instead penalizing you. If you’ve happened to do a good job saving. So in other words, Hey, we want you to save, but Hey, if you actually do what we say, you’re going to get penalized.

Zach:

This sounds nothing like building back better to me,

Mike:

That’s apparently that’s how you build back. There is, you know, penalize people that do what you say they should, that are doing what they are supposed to do. Right? So what this white paper is talking about, Zach, is legislative risk. So legislative risk. So we don’t, this is something we don’t talk enough about. I think so whenever you think about your 401k’s and 403b’s and IRAs, you know, you look at your account balances and if you think, you know, what could threaten your account balance? Like what could make that 401k worth less money? You know, what’s the first thing that comes to mind.

Zach:

Everybody just thinks about the market dropping or volatility.

Mike:

Yeah. We we talk about that a lot. I mean, right now the market is wildly overvalued by every measurable statistic, right? Yep. And so it’s natural to think, well, gosh, if the market crashes, I could lose a lot of money in my 401k. Like how do I structure my investments to, you know, to maybe prevent that a little bit. And there’s a lot of people talking about that, but what we don’t spend enough time talking about, I believe is a different risk to your retirement savings and that’s legislative. So we do talk about this, right? We talk about how your, for, if you have a 401k or you have an IRA or a 403b you know, one of the biggest lies out there is how they title your statement. So you go online, right? And you look it up and be like, oh, I’m going to fidelity.com to look up my 401k value or net benefits or whatever it is. Right. And you go there and you look up your account and how is that account titled Zach?

Zach:

I have like my name, it’ll say like Zach Holcomb, IRA or 401k.

Mike:

Yeah. We have a 401k here at work. And it’s, that’s what it says. Right? Here’s the problem. If you have a traditional 401k or IRA, that is a bald face lie, it’s not all your money. You have a partner to be accurate. And we’ve talked about this. That account should be titled Zach Holcomb and IRS’s 401k, Zach Holcomb and IRS’s IRA. That’s how it should be titled. You are when you own a 401k, a 403b, 457, a regular IRA. You are in partnership. You have a partner in that account. You have a joint owner. And the name of that joint owner is IRS now I got a question for you. If, if I came to you and I said, Hey, Zach, have I got an idea for you? Okay. Let’s open up an account where with a partner, silent partner, that partner is going to be you and the IRS. How do you feel from the get go

Zach:

Very uncomfortable.

Mike:

Cause why?

Zach:

I, I don’t want to give them any money.

Mike:

Yeah. Who wants the IRS to be their partner? Because by, oh, but I say, but no, no, wait, there’s more right. Because here’s how it works. When the IRS is your partner, they say to you, oh, you don’t have to pay. We’ll give you a tax deduction in the money coming in. We’ll let it grow. Tax deferred. You don’t have to text to later on. It’s cool. No tax today, taxes down the road. Does that sound a little bit better? Maybe? I mean, maybe on the surface, right?

Zach:

Got my attention a little bit.

Mike:

Oh, but what they don’t tell you because this partner’s really good at not telling me everything well, Zach, we forgot to tell you we can change like our share of the partnership, anytime we feel like, and by the way, it’s almost never going to be we’re never going to reduce our share. We’re only going to increase our share. And by the way, if you do what you’re supposed to and save a bunch of money, our share is just going to automatically go up in value. Do you want to be partners?

Zach:

I’m sprinting away as fast as I can.

Mike:

Exactly. Right? I mean, this is legislative risks. The IRS can do pretty much any darn thing they want, especially there’s a risk of them increasing tax rates as they spend more money. All right, we’re coming up on a break. So real quickly, here’s the deal. We talk about retirement plan all the time. Zach, what’s your favorite statement? When it comes to retirement planning?

Zach:

An investment plan is not a retirement plan.

Mike:

That’s right. Investment plan is not a retirement plan. So many people, all they do is they just invest money. They think they’re done. There’s a lot more areas. When you think about your retirement planning and taxes, that’s a big one.

Zach:

It’s a huge one.

Mike:

You need an income plan. You need a tax plan. This is something you look at every year, and then you need a risk management plan. There are two forces out there that you don’t control. The could radically impact your financial security in retirement. One is market crashes, market crashes. You can be in trouble really fast. All the fancy planning your advisor does suddenly crashes and burns because they didn’t account for that. The second risk is your health. You might die too soon. You might get sick along the way. There are very real expenses that result from that. So what are you going to do about that?

Mike:

So you need to answer all these questions. It’s not just your investments, income taxes, risk management. So here’s what you need to understand. Iras 401k’s 403b’s 457. So all of these retirement plans, they are all federally mandated, built and managed programs. Basically it’s a federal program. And any time we’ve been talking about this one for years, by the way, we know that in Washington, DC, that they never have enough money because we know in Washington, DC, that apparently getting elected takes one skill set. But part of that skillset is not basic math or basic economics. They can’t bounce a budget to kill themselves. Right. So remember, did you ever hear what Warren Buffet said about the quickest way to balance the federal budget?

Zach:

What did he say?

Mike:

He said, oh, it’s real simple. Just tell all the politicians, here’s the deal. Every year when you do a budget, it can not exceed- you cannot have more than 3% above GDP, gross domestic product. And if you can’t balance a budget within those parameters, you’re not eligible for reelection. So guaranteed. If they’re not eligible for reelection, they’re going to figure out how to balance a budget. Right. But there’s no incentive. Yeah. Anyway, the problem is, so they spend like crazy. They never tax enough. They always want more money. And for years we’ve been telling you, Hey, heads up, there are trillions and trillions and trillions of dollars sitting in these 401ks and IRAs. And at some point, you know, they know that they’re going to start coming after it. Folks that time is now that time is today. This act, what they’re talking about right now is a, it’s an absolute 180 degree turn on what they’ve done historically with these retirement plans. Historically, it’s been all about, we want to incentivize you to save for your own retirement.

Mike:

We want to give you an incentive to do this. We don’t want to, we want you to take through your own retirement, into your own hands, your own control. And we’re going to give you incentives to do that. That’s been the entire history of 401ks and IRAs suddenly out of the blue. They’re now saying what we think we’re changing our minds. That and how much control do you have over that?

Zach:

Zero.

Mike:

Yeah. Like none. Like none. They, they love to spend money. They have no economic, not an economic bone in their body, right? They don’t have the fiscal responsibility. They love to talk about it. But if you actually look at what they do, clearly they, their definition of fiscal responsibility is different from every other person in the country. Right? So anyway, the point is now they’re attacking. What they’ve done is historically they’ve supported you putting money in retirement accounts.

Mike:

Now they switch. They’re going to say, we’re going to start attacking people who have money in retirement accounts. You know, how dare you. You know, we’ve given you these incentives, how dare you actually use them. Now we’re going to attack you. So you know what? This reminds me of several years ago, I had insurance like car insurance with this big company, that name. And so I paid them for insurance. And then I had a couple incidents happen where, oh, insurance covers this, you know, a broken windshield from a rock off the road, kind of thing. I had a couple of those guess what happened? The insurance company dropped me. Do you know why they dropped me? Because I used the insurance that I paid for.

Zach:

They didn’t wanna help you out.

Mike:

It’s like, oh, I paid for this product. I used what I paid for.

Mike:

Suddenly. I can’t have the pro- I can’t pay for the product anymore. That’s like, you’re gone. That’s what they’re doing in Washington, DC. It’s like, oh, you we’ve given you this product, 401k IRA. You’ve actually used what we’ve given you. Oh, now we got to take that away. Now we got it. We messed that up. We can’t have that. Right. There’s such morons. Okay. So here are some of the ways that they are attacking you, your retirement accounts. This is what they want to do. Number one, they want to say, oh, if you’ve got too much money, you can’t, you can no longer add more. Like there’s a limit as to how much you can have, right. If you have too much money now, how much money is too much money, Zach?

Zach:

10 million.

Mike:

Exactly.

Mike:

Right. 10 million, 10 million, 10 million, 10 million dolla. Right? I don’t know what that’s from, but I remember.

Zach:

From something.

Mike:

Yeah. 10 million, 10 million. Anyway. So the point is 10 million. I know. As your listening, you’re sitting there like, oh, whew, wipe the sweat off my brow. I don’t have no 10. I wish I had 10 million in my IRA. Right? I wish, well, here’s the deal. You are making a huge mistake. If you think that that’s where they’re going to end this game. So this is where I’m going back to this white paper here. That’s written by Becky Ruby Swansberg, who used to work in DC for all these people. She knows how they work. In this white paper she actually addresses this, she says, as is often the case with federal legislation, the challenge that you know, that the legislators face is getting a new framework passed into law, right?

Mike:

So in this case, the idea is, Hey, here’s a limit as to how much that we would allow that we think is reasonable in a 401k or an IRA, $10 million. And they’ve got it at a high enough level that you’re like, eh, exactly. That only affects rich people.

Zach:

Not a big deal to me.

Mike:

So you know that kid in school. Remember, when you were in like middle school, how there’s always, this kid is always a boy. And the, and this boy lived under the, under the life mission or the outlook as my mother would call it. If you give him an inch, he’ll take a mile.

Zach:

Oh yes.

Mike:

You know that kid? Yep. You crack the door. Oh, the door’s cracked. Boom. He just goes lambasting through.

Zach:

Straight through.

Mike:

That’s what Becky Ruby Swansberg’s talking about. It’s like, this is what Congress does.

Mike:

Look at what they do. What they’re trying to do here is get their foot in the door by only applying it to people with over $10 million.

Zach:

The rich.

Mike:

The rich. Guess what? The minute that this passes. If they get this to pass, guess what the next step is?

Zach:

It’s going to be to slash that number down.

Mike:

That’s right. It’s like give an inch, take a mile. Next maybe we need that because we need money. Like one of the things they actually talk about in here and she says, she says, house Democrats have admitted the tax provisions in this bill fall short of raising enough revenue to cover the three and a half trillion dollar price tag.

Zach:

So they’re basically admitting they’re going to have to take more money.

Mike:

Yeah. They’re admitting it. Which by the way, what does president Biden say? He says, oh, this isn’t going to cost anything.

Mike:

It’s revenue neutral. Right. Which is another example he’s been in office for 45 years. And a great example of how politicians, especially lifelong politicians don’t know how to do basic math. Like apparently he does not understand that 10 minus seven equals three,

Zach:

His calculators flipped over backwards.

Mike:

And figured out that I, I mean, if, if, if, and I’m picking on the president right now, all politicians are this stupid. It seems like none of them understand this stuff. It seems like, unless there it’s in the rare circumstances that you catch them away from a microphone when they can be honest. Right. They’re lying scum.

Zach:

Yes.

Mike:

Anyway. So here’s what they’re saying. If you have too much money in your 401k, in other words, we gave you this incentive to use, oh my gosh, how dare you use that incentive? We now have to, you can’t do it anymore.

Mike:

Just like my insurance. Right. And they’re just gonna take that number. If they get it in there, make it lower and lower and lower what’s to prevent them from lowering it to a million saying, you know, yeah. More than a million dollars in your 401k, that’s probably enough. You need to stop putting money in that. And oh, by the way, as always with these ‘people’, there’s more, of course they also want to limit what you can invest in. They want to say, oh, what’s happened. They’ve noticed is that some people who are really smart, they will take their IRA and convert it to a Roth IRA. Why would they do that, Zach?

Zach:

Well, they want to, they want to pay the tax now and you know, not have to pay it later.

Mike:

Yeah. All the re you convert to Roth, IRA, you pay tax now on what you have.

Mike:

But once you do that, everything else is tax-free growth is tax-free everything’s tax free. So what’s happened is some smart people said, oh, I’m going to convert IRA to a Roth. And then I’m actually going to invest in some options. It gives me some wonderful upside opportunity. They were smart. And they grew those Roth IRAs by a lot. And it’s all tax-free because why the government said you could, well, oh my goodness, how dare you use our rules intelligently? So what are they saying? Ah, you grow too much. Guess what you have to take required. First of all, we’re going to limit you. Can’t invest in that kind of stuff. They don’t want you to, we don’t want you to invest in anything that would actually grow a lot in your IRA, especially in a Roth IRA.

Zach:

Shame on you for making money.

Mike:

How dare you make smart financial decisions, right?

Mike:

And if you do, let’s say you do make those smart choices and your IRA grows to a certain amount. We’re going to start forcing you pull money out of it, even though you’re not 72 yet. So we’re going to start punishing you for actually being smart. You make good decisions. You must be punished. That’s their perspective. It’s like, what is wrong with these idiots? But that’s what they’re doing. 180 degree change. But here’s the deal. This is our elected officials in Washington, DC. They spent so much money now that they are scrambling to pay for all of their crazy spending. They’re now looking for money anywhere. And they’re starting to attack these retirement accounts. What can you do to protect yourself? I’m going to give you a couple of options here, but here’s something that you might not be thinking of. That may be the very best option that you should be looking at.

Mike:

You know, one of the things that they don’t talk about anywhere in this whole tax thing that they want to do, you know, if they don’t talk about it all life insurance, do you know that the Roth IRA was designed after the tax rules behind life insurance? Life insurance is the most powerful tax-free planning tool available. Obviously, if you qualify and if it’s appropriate, right, it’s not appropriate for everybody. But I’m telling you that what they’re doing in Washington DC is going to make life insurance really popular, because think about it. A 401k that’s a federal program. The whole life insurance is it’s a contract for the people in Washington, D.C. To change a federal program. We would call that easy peasy. Right, Zach?

Zach:

It’s easy peasy, yep.

Mike:

It’s easy for them. Is it easy for them to change contract law?

Zach:

No.

Mike:

Not easy at all. That’s why oftentimes you see life insurance exempted from a lot of things because it’s contract law and changing contract law is a lot different animal than changing a federal program.

Zach:

And they like things that are easy.

Mike:

Oh yeah. They like, where’s the easy money that’s in 401ks and IRAs. So one of the things that even if you’re in your fifties, early sixties might be worth evaluating or investigating, you know, Hey and or maybe, and trying to answer this question would certain types of life insurance, it has to be specially designed would certain types of life insurance benefit you. I don’t know everybody’s different, but I’m telling you, it’s one of those areas. That’s going to be more and more popular over time. All right, we got to wrap up the show, Zach and the core message I want to leave is this: Washington, DC, our government, which has historically promoted you saving money in 401ks and IRAs, they’re suddenly coming at us the other direction saying, you know what? We’re going to punish you, if you actually follow our advice. It’s now more than ever.

Mike:

It is time to take action and do something. You need to protect yourself from the actions of the government member in retirement. It’s not necessarily how much you make. It’s how much you keep. And we have a free service. We call it a, and we call it a retirement CPR, complete planning review, where we help you. Absolutely for free, take a look at where you are in all areas of retirement planning, including your tax planning. And we help you make sure you’re making the right decisions. We help you make sure you’re protecting yourself from those types of legislative risks. Now’s the time to do something about it. Pick up the phone, call us. Let’s have a conversation. Let’s give you a second opinion. It’s free. It’s easy. And it’s a no brainer. Zach. Let’s wrap it up. What’s that phone number?

Zach:

Mike, it’s (512) 886-5850. Again, that’s (512) 886-5850. Hey, to all of you listeners out there. We appreciate you joining us this week. Have a great evening. We’ll see you again soon.

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