Seller Financing With No Interest What Doe The Irs Do Uncle Sam’s Snake Oil

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Uncle Sam’s Snake Oil

Uncle Sam and his band of merry-men, known as Congress, are pushing snake oil on the unsuspecting public in the form of retirement plans. But wait, isn’t a pension plan one of the features we look for when shopping for an employer? Well, not all pension plans are created equal and in most cases, quite disastrous.

Distributions from all qualified plans must begin no later than April 1 of the calendar year in which the participant reaches age 70 1/2 or the calendar year in which the employee retires. Special rules apply if distributions are made to owners of 5 percent of the business. The purpose of minimum distribution rules for retirement plans is to force the owner or participant of the pension plan to withdraw money from the plans, thus triggering income tax on these moneys. On April 16, 2002, the Internal Revenue Service issued final regulations as to these distributions.

Generally, the idea under the rules is that the owner or participant of the pension plan will start withdrawing money from the pension plan when they finish working or at age 70.5. One of its purposes is to insure that these monies will be subject to income tax before the death of the owner.

Based on the current system of government-designed pension plans, the average retired couple will pay eight to twelve times more in taxes on their contributions and savings in their IRAs and 401(k)s than they have saved over the years. Generally, it’s understood that you put money into your pension plan and it’s tax-deferred and that’s a big deal. Unfortunately, you may be in a higher tax bracket if your pension collection is correct.

In addition to a higher tax bracket when they reach retirement, many people find themselves free and clear; They no longer have a mortgage interest deduction to offset income taxes. Most Americans get back everything they save in taxes within the first two years of distributions during their accumulation and contribution years. Therefore, there is an insidious income tax waiting for many people and if they do not plan their wealth, double taxation as both income and wealth tax.

Many defer the transfer of their eligible funds until age 59 ½ to avoid the 10% tax penalty. By sometimes delaying paying taxes, retirees find themselves in a higher tax bracket after age 59 ½ because Congress can raise tax rates due to political changes. Inevitably, someone has to pay the piper sooner or later.

What is the answer? Simple, investment grade life insurance. This type of life insurance is not like the countless letters you receive in the mail. It is life insurance that focuses on triple compounding because it is tax deferred. The difference between life insurance experience and pension plans is that when it comes time to pay, life insurance is received as a loan. This is a powerful concept because the income is not taxable; Debt is not a form of taxable income. However, as a loan you will have interest on the payments. Most people mistakenly think that they are going to pay interest on their own money with life insurance. While this is theoretically true, the best insurance carriers provide for zero wash loans where the interest is basically waived off or taken out of the death benefit when the person passes away. We’re talking about real life insurance, not the typical death insurance that most people have because you use it while you’re alive.

The best candidates for building a wonderful wealth with investment grade life insurance are those in their thirties to fifties. Once committed and in reasonable production they will retire rich and without annoying taxes around the pension plan. There are also strategies for starting a contribution plan to your investments that will need to restore your current finances. Watch a presentation on ways to finance your retirement [http://www.abundantmoney.com].

If you’re over fifty, I’m sorry we missed you. If you have children, don’t let another day go by without them starting a plan because 79 million people are heading for Social Security transfers in the next few years. Although Social Security got a 2.7 percent boost the next year (2005), Medicare ate up most of the growth and when 79 million eligible Americans signed up – see below.

James Burns, Esq.

Law Offices of James Burns

18662 MacArthur Blvd., 2nd Floor

Irvine, CA. 92656

Jambur64@cox.net

(949) 440-3243

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