Category: Tax Advantages of Bank On Yourself

Pros, Cons and Why the SECURE Act WON’T Make Your Retirement More Secure

January 23rd, 2020 by Pamela Yellen | Leave a Comment

The SECURE Act of 2019 is supposed to help more Americans save for retirement. The new legislation will have an impact on retirement plans – and not all of them are good.

In December of 2019, Congress passed H.R.1994 – the SECURE Act of 2019 – which contains the most sweeping changes to government-controlled retirement accounts – such as 401(k)s, 403(b)s, and IRAs – in more than a decade.

The SECURE legislation – which stands for “Setting Every Community Up for Retirement Enhancement” – put into place several provisions supposedly intended to strengthen retirement security.

Not surprisingly, the financial services industry spent many millions of dollars lobbying Congress to ensure passage.

So is the new legislation in your best interests? Is the SECURE Act really likely to increase your retirement security?

Shhh! Your Bank Has a “BIG” Dirty Little Secret – it Could Crush Your Retirement

November 15th, 2018 by Pamela Yellen | Leave a Comment

Who can forget those dark days of the housing market crash of 2008? The vacant homes and neglected lawns. The abandoned swing sets and forgotten barbecues. The bright signs and bold arrows that needed little explanation: “Foreclosure.” “Auction.” “Bank Owned.”

We’re told that the housing bubble and collapse was about predatory lending and high-risk borrowers who were duped into loans that they couldn’t afford. The massive regulatory response to the subprime crisis meant that banks were no longer allowed to behave BADLY… so they chose to behave DIFFERENTLY.

Shhh. Your Bank Has a “Big” Dirty Little Secret. Read this Very Carefully…

The largest source of mortgage lending in the United States is now being done by non-banks – financial entities that offer unsecured personal lending, business loans, leveraged lending, and mortgage services… but do not hold a banking license. As a result, they’re not subject to standard banking oversight and can engage in risky lending.

But where do they get the money to make these loans? You guessed it: Wells Fargo, Citibank, Bank of America and everyone else who got their hands dirty ten years ago. [Read more…] “Shhh! Your Bank Has a “BIG” Dirty Little Secret – it Could Crush Your Retirement”

How to Pay Zero Taxes in Retirement – Without Being Broke

March 27th, 2018 by Pamela Yellen | Leave a Comment

Do you have money in a tax-deferred retirement account such as a 401(k), IRA or 403(b)? If so, you’re sitting on a tax time bomb.

I’m going to reveal the tax traps you face and show you how to move toward a 0% tax bracket in retirement (legally!) – but not by doing it the way most people do it, which is by being broke!

Conventional wisdom says, “Maximize your contributions to tax-deferred plans. Your money compounds without being reduced by taxes, and you’ll end up with more money during retirement.”

But like much conventional wisdom about personal finance, it’s not true…

The Society of Actuaries says if the tax rates are the same,

It doesn’t make any difference whether [the taxes] are taken away from you at the beginning (tax-exempt) or at the end (tax-deferred). It’s the same fraction of your money that is left to you.”

But most people look at their savings and think it’s all theirs. You may have forgotten you’ll owe Uncle Sam the taxes he let you defer all those years – on every penny you’ve put in and every penny of growth.

And according to Boston College’s Center for Retirement director, Alicia Munnell,

It’s a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had.”

If the tax rates are actually lower during your retirement, you might come out ahead by deferring your taxes. But where do you think tax rates are headed long term? You must consider what tax rates might be during a retirement that could last 30+ years.

Most people we talk to think taxes ultimately must go up due to the aging demographics of our country and our unsustainable national debt. (Recently the debt passed $21 trillion for the first time.) If tax rates do go up, and you’re successful in growing your nest-egg, you’ll simply end up paying higher taxes on a bigger number. [Read more…] “How to Pay Zero Taxes in Retirement – Without Being Broke”

Why is the “Father of the 401(k)” Now Putting His Money into a Bank On Yourself-Type Plan Instead?

March 12th, 2018 by Pamela Yellen | 2 Comments

It caused quite a stir when the man who is credited with being the “father of the 401(k),” Ted Benna, recently announced that he’s put a substantial part of his own money – “probably the biggest part of my wealth” – into what is most commonly known as a Bank On Yourself plan.

You see, for at least six years now, Benna has been calling the 401(k) a “monster” that “should be blown up.”

Benna is credited with finding a way to capitalize on the tax code to create a way for working men and women to supplement the pension plans that many workers used to have. Those pensions plans have been disappearing, and 401(k)s were created to hopefully help pick up the slack.

But over the years, Benna watched Wall Street and Big Business pervert the 401(k) in ways he couldn’t possibly predict.

In a recent interview, Ted Benna discussed three reasons why we should be very leery of 401(k)s and IRAs:

The government may repeal the 401(k) and IRA, so you won’t be able to put any more money pre-tax into these accounts, or the amount you can put in will be drastically reduced (Congress considered doing that again last year!)
Benna believes the next stock and bond market crash is imminent and could wipe out 40% of the typical portfolio
Wall Street has hijacked these plans, and the excessive fees charged by mutual fund companies and plan administrators are robbing you of up to half of your nest egg

I’ve Been Sounding the Alarm About 401(k)s and IRAs for Even Longer than Benna

Is Your Personal Balance Sheet – Your Financial Snapshot – Giving You a True Picture?

February 1st, 2018 by Pamela Yellen | Leave a Comment

A balance sheet shows you at a glance what you own, what you owe, and what the difference is. The difference is your “net worth” – and the greater your net worth, the more you’re in a position to meet life’s financial uncertainties.

A balance sheet for John and Jane Doe, showing assets including $300,000 in retirement savings; and showing liabilities. — **Figure 1. A Simple Balance Sheet**
It’s called a *balance* sheet because your assets minus your liabilities always equals – *balances* – your net worth.

If you owe more than you own, your net worth is a negative number, and that’s an early indication of possible financial problems or bankruptcy in your future.

Here’s a simple balance sheet. See Figure 1. We see that John and Jane have added up the fair market value of their major possessions – their house, car, furnishings, cash in the bank, and retirement savings – and have total assets of $570,500. But when we subtract what they owe – their first and second mortgages, car loan, student loan, and credit card balances – their net worth (the cash they could come up with if they sold everything) is $369,000. [Read more…] “Is Your Personal Balance Sheet – Your Financial Snapshot – Giving You a True Picture?”

Congress Considers Axing Your 401(k) Tax Deduction

September 13th, 2017 by Pamela Yellen | Leave a Comment

Congress is considering proposals right now to take away the tax advantages of your 401(k).

To help finance the tax reforms being proposed, Congress is eyeing axing the up-front tax deduction for 401(k) contributions. And one proposal would also change the tax-deferred nature of 401(k)s by imposing a 15% tax on your annual gains.

Why would Congress consider tinkering with the tax benefits of such a popular program as the 401(k)?

For the same reason that notorious holdup man Willie Sutton gave for robbing banks:

Because that’s where the money is!”

The current taxation of 401(k) plans was estimated to have cost the federal government more than $90 billion in potential tax revenue last year alone, according to the Joint Committee on Taxation. [Read more…] “Congress Considers Axing Your 401(k) Tax Deduction”

Why Does Ted Benna, the “Father of the 401(k),” Love the “501(k)” Plan?

August 1st, 2017 by Pamela Yellen | 2 Comments

The man widely credited as the “Father of the 401(k) Plan,” Ted Benna, is among those saying the plan is no longer a good way to save and invest for retirement. He cites concerns that the government may change the rules, and not in your favor; that an impending market crash will wipe out much of what you’ve saved for your retirement; and that staggering fees can eat up a large portion of your nest egg.

Benna has gone on record as endorsing something that has been creatively called a “501(k) Plan.” Ted Benna says,

I created a monster (the 401(k)) that should be blown up… I’m now putting most of my money in the 501(k).”

Don’t get distracted by the name “501(k).” Although “401(k)” refers to the section of the Internal Revenue Code that deals with retirement plans, “501(k)” is an obscure Internal Revenue Code reference that describes the educational status of certain child care organizations! Using “501(k)” to refer to some kind of retirement plan is a gimmick dreamed up by Madison Avenue types.

But all they did was take the Bank On Yourself concept, which is a proven 401(k) alternative, and give it a mysterious new name, the “501(k),” hoping you’ll pay money to find out what they’re talking about.

But while others are charging you money for this information, we’ve been giving it away for years! For FREE information about the Bank On Yourself method that others call a “501(k),” download our free report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future here.

History of the 401(k) Plan and Ted Benna’s Contribution to It

Is “Tax-Free Retirement” Too Good to Be True?

June 19th, 2017 by Pamela Yellen | Leave a Comment

Tax-free retirement—living a comfortable life in retirement without the obligation to pay income tax—comes as the result of planning and arranging your finances (following IRS guidelines every step of the way) so that when you retire, none of the money you receive is taxable—perhaps not even your Social Security income.

Tax-free retirement is good, and this article reveals how to make it happen.

Is Avoiding Taxes on Your Retirement Income Legal?

Reducing or avoiding taxes is perfectly legal. People take steps to reduce or avoid taxes all the time. They may donate to charity to avoid paying as much tax. They deduct their mortgage payments. They take legitimate business deductions. They may shift medical expenses, hoping to bunch expenses into one year and exceed the threshold for deductions that year. These are just a few of the legal tax-avoiding measures Americans take every day.

Many people even believe they have an IRA or a 401(k) to avoid paying taxes. But that’s a trap, because traditional IRAs, 401(k)s, and most other government-controlled retirement plans do not allow you to avoid paying taxes. They merely postpone tax day. We’ll talk more about that in a few minutes.

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands.” — Supreme Court Justice Learned Hand

So while avoiding taxes is legal, evading taxes is not. Maybe you don’t report your income. Maybe you take deductions you’re not allowed. Or maybe you just tell the IRS to take a hike. That’s tax evasion.

But make no mistake: A tax-free retirement can be achieved legally, using IRS-approved methods.

Ways to Avoid Income Tax in Retirement

The Truth About Whole Life Insurance and Why It’s More Than a “Rich Man’s Roth”

May 1st, 2017 by Pamela Yellen | Leave a Comment

UPDATED October 2019

I came across an online article by a blogger who ignorantly claimed that the only good purpose for whole life insurance was as a rich man’s Roth and only for individuals whose high incomes made them ineligible for the tax-saving advantages of a Roth IRA. He’s dead wrong — you don’t have to be wealthy to benefit from the incredible advantages of whole life insurance.

Let’s look at how a Roth IRA works vs. a dividend-paying whole life insurance policy.

How Does a Roth IRA Work?

A Roth Individual Retirement Arrangement (Roth IRA) is an IRS-approved strategy that allows you to invest money you have earned by making contributions to a Roth IRA plan you have set up. You are not allowed to take a tax deduction for your contribution as you are with a traditional IRA. However, any earnings you withdraw from a Roth IRA aren’t taxed — as long as you’re at least age 59 1/2 and you’ve had the Roth IRA for at least 5 years.

How a Roth IRA differs from a traditional IRA

Roth IRAs are quite different from traditional IRAs.

With a traditional IRA, your contributions are tax-deductible. However, when you withdraw money from your traditional IRA—and you must withdraw specific percentages annually, beginning soon after your seventieth birthday—you must pay taxes on everything you withdraw—at whatever the tax rate happens to be at the time.

See the table for a summary of the key differences between a Traditional IRA and a Roth IRA. [Read more…] “The Truth About Whole Life Insurance and Why It’s More Than a “Rich Man’s Roth””

Bill Williams’ AHA Moment: How Bank On Yourself Freed Him from 401(k) Loans and Mutual Funds

April 7th, 2017 by Pamela Yellen | Leave a Comment

Bill Williams is an enthusiastic believer in the Bank On Yourself concept because of how it has helped his family financially. He wrote to me several years ago, and I included his letter on page 228 of my 2014 New York Times best-selling book, The Bank On Yourself Revolution:

Thanks for all the good things you are doing, Pamela. I am working with my Bank On Yourself Professional to set up my third policy, and I am so appreciative of her guidance and expertise. She has been tremendously supportive.

The real “snake oil” is all of the purported advice about savings and investing we have been fed by the “experts” in the past. I get so upset by the advice to invest with before-tax dollars into 401(k)s or 403(b)s.

I’m over sixty years old and know when I turn 70½, I’m going to have to take required withdrawals from my plans and have the added burden of paying taxes on them. After all, the IRS wants to get its hands on the taxes they let me avoid paying all those years.

I wish not only that I had learned about Bank On Yourself earlier, but that the concept could be taught to the masses when they are young enough to get the maximum benefit from it.

Here’s why I say that: I think of all of the purchases I’ve made through the years where Bank On Yourself would have been a much better means to fund them. As an example, my son’s college expenses, which I paid every cent by selling stock and mutual funds and taking a loan from a 401(k).

Needless to say, my son received a great education (to his credit), but dear old dad has nothing to show for it. I had to put money into the stocks, 401(k), and mutual fund, so I had the resources—which could have been so much more powerful in a Bank On Yourself policy! It’s as simple as that. If I had done that, I would now still have the policies, which would have even more value.

I am depleting an IRA to fund my third policy and to help fund my first two Bank On Yourself-type policies. I just hope I live long enough to enjoy all the benefits.