There’s talk now of capping pretax 401(k) contributions to $2,400/yr because tax reform.
Most Americans don’t even save that much but… even if they did, it hardly harms them to yank away the tax “benefit” they’re getting.
Of course the retirement planners are up in arms over this.
Like… the world will somehow end without Muh Tax Deducshun (MTD).
Here’s my take on all this:
Employees can finally drop the delusion of “free money lol” (FML) from their employer match and get their full salary back so they can save elsewhere.
“But… Muh Tax Deducshun!”
Look, I get it.
Tax deducshuns are major secksy.
But the truth is…
A present value of future savings calculation rarely demonstrates an amazing advantage gained by deferring tax payments until later. But most people don’t understand this because… present value of future income, savings, or expenses isn’t taught in school and… it’s not taught in most finance books and… it’s not taught by most financial planners unless…
… they creatively tinker with future tax rates (by assuming total tax payments or rates remain the same). If they showed accurate present value calculations, retirement planners would *almost always* destroy their argument for deferring taxes until later.
Retirement plans have ALWAYS (aaaaaaaaaaaaaalways) been a tax gimmick invented to satisfy the taxpayer’s desire for immediate gratification for the process of saving money.
In other woids, a…. contradiction in terms.
Saving necessarily requires some level of delayed gratification.
That doesn’t mean you need to wait 20 years to enjoy the fruits of your labor but… let’s be real.
No one on the face of the Earth is so dumb as to believe they can have their cake and eat it, too.
Some people are delusional or evasive of this fact, yes.
But no one is really and truly dumb enough to honestly believe it.
So, where does that leave us?
Well, boys and ghouls, it leaves us with a frighteningly simple solution: eliminate taxes altogether.
Easier said than done, right?
For the last 11 years, I’ve been showing folks simple insurance-based strategies that immediately eliminate the *requirement* for them to pay income (or capital gains) tax on their savings.
And, do it with absolutely zero risk of going to jail.
Details once you get on my email list.