Get Your Money Saved for This
Right Now
By Dr. Steve Sjuggerud
Friday, October 30, 2009
Better get your money saved..
On January 1 – just two months from now – our desperate government will foolishly give us a too-good-to-be-true deal...
You could make $336,000 – potentially much more – all because of government desperation. But you need to get your act together to make the most of it.
It takes a bit of explaining... But I can't wait to take part in it. It is the best return on your money with next-to-no risk I can imagine. As one financial planner put it: "Would you rather pay taxes when you plant the seeds or harvest the crop?" This is a chance to pay on the value of the seeds, not the crop.
What I'll do on January 1, 2010 is incredibly simple. I will convert six figures worth of my IRA into a Roth IRA. Doesn't sound like a big deal... but it REALLY is. Let me explain...
Let's say you have a $100,000 IRA (just to keep the math simple). And let's say you're 50 years old. If that IRA account grows 10% a year for 20 years, it will have $672,000 in it. At that point, you'll be 70 years old and you'll have to start taking money out...
The government will likely take as much as half of it.
If it's a traditional IRA, the government will treat the money you take out as income and will tax you on it. With America's government debts expanding so rapidly, I hate to consider how high tax rates could be in 20 years... I wouldn't be surprised to see some income tax rates reach 50%.
In short, with a traditional IRA, the government could take half of your money in taxes – that's $336,000 in our example.
But if you convert it to a Roth today, the government will get none of that money... the entire $672,000 will be yours, TAX-FREE. Here's why...
The government's budget deficit is the worst ever – by far. It needs your tax dollars right now. So it would rather take $33,000 in tax from you now (on your $100,000 worth of "seeds") than $330,000 or much more from you in the future (on your $672,000 worth of "crops").
In short, the government will allow anyone to transfer a traditional IRA into a Roth IRA starting January 1, 2010. By doing this, you're making an incredibly safe "gamble." You're giving up $33,000 today to let your wealth grow TAX-FREE forever.
You see, once your money is in a Roth IRA, it is no longer the government's to grab – you've already paid them their taxes.
That's the difference between a Roth IRA and a traditional IRA... In a Roth, you fund it with after-tax money and let it grow tax free. In a traditional IRA, you fund it with pre-tax money, and then you have to pay taxes on that money when you take it out.
You'll get so many benefits if you do the switch...
For example, if inflation hits, and your $672,000 dollars turns into 10 times that – $6.72 million – the government still can't tax you... You've already paid your tax bill on that money. You're a tax-free multimillionaire.
Another benefit is tax rates today versus tax rates in 20 years... By converting to a Roth IRA now, you're paying taxes on your IRA at TODAY'S income tax rate, which is most likely lower than future income tax rates.
Here's one of the biggest benefits of all: You do not have to pay your $33,000 tax bill out of your $100,000 IRA – you can pay it out of other money. So you can have the full $100,000 at work for you, tax-free. This is the way to do it, if at all possible.
Even better, the government will give you a few years to pay off the full tax bill. You can spread out the payments through the 2012 tax year. So in reality, your $33,000 tax bill won't have to be paid in full until April 15, 2013 – or October 2013 if you take an extension on your taxes. From the beginning of 2010 until October 2013 – it's like taking a four-year tax-free loan from the government.
So get your act together. Start getting your money saved up outside of your IRA. And convert your traditional IRA to a Roth IRA on January 1, 2010.
The government is willing to take your tax payment on the seeds instead of the crops... and it's willing to give you nearly four years to pay the bill. It's foolish. Jump on it!
Good investing,
Steve |
THE YEAR'S BIG IPO IS FLOPPING
It's starting to get rough in the market... even flashy IPOs are struggling.
For a picture of this "struggling," take a look at the price action in one of the leaders of language education, Rosetta Stone.
Until this spring, you probably ran across Rosetta Stone only in mall kiosks and magazine ads. But in April, that all changed when the company staged the year's most successful public offering. Shares gained 40% on the first day of trading... and climbed as much as 76% higher within a month.
But as you can see from today's chart, folks just don't have much stomach for newer, riskier companies lately. Rosetta is down 35% from its summer peak... and just logged its lowest closing price since going public. The insiders and investment banks didn't even get enough time to dump all their shares!
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A top FEMA official admitted to a House panel that his agency has no way to assess the effectiveness of homeland security improvements made from the $29 billion spent since 2002.
Timothy Manning, deputy administrator of the Federal Emergency Management Agency, told the House Homeland Security Emergency Communications Subcommittee Tuesday that his organization spent $5 million during the past 18 months reviewing how it spent the original $29 billion the federal government provided, the Washington Examiner reported.
Manning insisted that the expenditures have made the nation better prepared for a terrorist attack, but he wasn't able to say exactly how.
"Existing data tells us very little about our return on investment," Manning testified before frustrated committee members.
– Newsmax
There are four ways in which you can spend money.
You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money.
Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost.
Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch!
Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government.
– Milton Friedman, libertarian,
in a 2004 interview
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