Biden | Major Changes To Your 401(k) - YouTube

Biden's plan hurts high-income earners.  In this episode, I'm going to address  

Biden-major changes to your 401k.  

So, get ready. I'm going to explain what changes  are in the works and what you should be doing.

Hi, I'm Doug Andrew. I've been a financial  strategist and retirement planning specialist  

now for more than 4 and a half decades. And so, I  keep very close to a lot of the legislation things  

that are in the works based upon congress.  And sometimes congress is the opposite of  

progress. Pro and Con are opposite, you know?  And so, I wanted to alert you about some of the  

things that are in the works under Biden's  proposed plans with taxation. First of all,  

let's go through and address what a qualified  plan is, traditional IRAs and 401(k)s versus  

the Roth IRAs and 401(k)s before I share with  you what he's proposing to change. These are very  

important concepts that you as an  American taxpayer need to understand.  

And so, as we proceed, I'm going to share with  you some concepts that maybe you didn't even  

understand before as it relates to traditional  IRAs and 401(k)s versus Roths. So, in a nutshell,  

the traditional IRA and 401(k)s type of a plan  and this would include 457s, 403(b)s, tax-shielded  

annuities, pensions, profit-sharing plans. These  are qualified plans. Qualified with who? The  

government, Uncle Sam. Uncle Sam is your partner,  okay? Now, when you put money into a traditional  

IRA, 401(k) the original premise was "Oh, put  in pre-tax dollars or you get a tax deduction  

for what you're contributing like an IRA. 401(k)s  are funded with pre-tax dollars. And so, you get  

a tax break on uh the seed money, the contribution  money. I often use the metaphor of the farmer and  

the seed. In other words, if you were a farmer  and you had the choice in the springtime when  

you bought your seed that you didn't have to pay  tax on the price of the seed when you bought it.  

But you planted this seed, you irrigated, you  cultivated, you worked hard all through the summer  

and then in the fall... I'm talking about the fall  of life, retirement. When you go to harvest your  

crops, now you agree to pay tax on what you  sell your harvest for. That's a traditional  

IRA or 401(k)s. You get a tax break on the seed  money but you have to pay tax when you harvest  

the money. That sounded good years ago because  they would say, "You know, you're going to be in  

a lower tax bracket", right? Well, that has not  been true or axiomatic for more than 25-30 years  

now. Most people who have a respectable retirement  nesting at retirement find themselves in as high  

or higher tax bracket as they were ever in during  their earning years even if they have less income.  

Why is that? The reason why people find themselves  in his higher, higher tax brackets is because they  

were sort of going down the highway of life  trying to achieve financial independence as  

the destination and they had one foot on the gas  pedal but the other foot was on the brake pedal  

so to speak. They were deferring, deferring  to some future perceived unknown advantage.  

And simultaneously and they were killing their  tax deductions. See, most Americans pay off  

their house. They don't have that deduction in  retirement. They do not have children if they  

moved back home as adults. You can't deduct them  anymore as dependents. You're not contributing  

money to IRAs and 401(k)s anymore. So, you don't  have that deduction. If you're a business owner,  

you don't have those deductions and congress keeps  raising taxes. So, many people find themselves  

paying back every dime they saved in tax during  the first 2 and a half, 3 years of retirement  

that they saved over the 30 years on the seed  money the contribution money. And they do it  

again and again and again. So, whose retirement  were you planning? Yours or Uncle Sam's? Well,  

a lot of people began to realize it would be far  better to simply pay tax on the price of the seed  

and enjoy the harvest without tax. And so in 1997,  when the government was hard up for tax revenue,  

they did this primarily for them not for us.  But senator Roth said "I've got an idea. Smart  

people are realizing if they have a respectable  retirement nest egg, they're savers, it's far  

better to pay tax on the seed money and enjoy the  harvest without tax." And he wanted to trigger tax  

revenue. So, he said, "We'll name this after me."  The Roth IRA and then later, Roth 401(k)s. Now,  

that's a step in the right direction but there's  still a lot of strings attached that I'll explain.  

But see that way you pay tax on the seed money  and you enjoy the harvest without tax. And if  

you think taxes in the future will likely be  higher which most people do, that's going to be  

far better than a traditional IRA and 401(k). What  that did is it triggered tax revenue back in 1997.  

When people rolled money over from a traditional  IRA 401(k) to a Roth then they had to pay tax and  

then they could accumulate the money tax-free  from that point forward and access it tax-free.  

So, Roths are a step in the right direction.  But let me share with you the difference here  

next. So, I'm going to simplify this. Let's  say that we had a lump sum of $150,000  

and we're earning 10%. 10% means your money will  double every 7.2 years. This is called the rule  

of 72. You divide 10 the interest rate you're  earning into the number 72. And that tells you  

how fast your money will double. So, let's say  the earning 10%. Your money doubles in about 7  

and a half years. So, 150,000 doubles to 300,000.  If that's pre-tax dollars, 150,000 and now you've  

tax-deferred it, it's grown to 300,000. Now, at  10%, 10% 300,000-dollar nest egg would be 30,000  

a year. You withdraw the 30,000 a year of interest  in retirement and now you have to pay tax.  

Most Americans between federal and state income  tax (41 out of 50 states has a state income tax)  

pay about a third in tax. What's a third of  30,000? 10,000. You're only netting 20,000 to  

buy gas, groceries, prescriptions and golf green  fees, right? Well, what if you did a Roth? Now,  

if you uh paid tax on the seed money, instead of  150,000 in a 33% bracket, you only have 100,000.  

Are you with me? 100,000 earning 10% doubles  in 7.2 years up to 200,000. And 10% of that is  

20,000 a year tax-free. Did you figure out  something there? It's exactly the same net  

whether you put money in a traditional IRA, 401(k)  or a Roth IRA 401(k) provided what? Taxes stay the  

same. But most Americans, when I ask audiences  "How many of you think taxes in the future will  

likely be lower?" I get nothing but crickets.  "How many think they're going to be the same?"  

A few hands go up. But when I say, "How many think  that taxes, in the long run, will be higher?" And  

a sea of hands goes up. And I go, "So, why are  you postponing and delaying, procrastinating  

tax to some future-perceived unknown advantage?  And then you withdraw your money when we all agree  

taxes will likely be higher?" I can prove to you  mathematically that if you chose a Roth and taxes  

go up, you will likely have 33 to 50 percent  more net spendable income when taxes go up.  

So, Roths we're a step in the right direction.  But my favorite vehicle is what many savvy CPAs  

and tax attorneys call the Rich Man's Roth. So,  let me share with you what Joe Biden wants to do.  

So, President Biden, he's trying to raise a lot  of tax revenue and so, he is proposing that they  

get rid of pre-tax contributions to plans like  401(k)s. Did you hear that? In other words, if you  

had a 100,000-dollar annual income and you wanted  to allocate 15,000 to go into a 401(k) where  

you worked, you only have to pay tax on 85,000  because you get to put in pre-tax contributions.  

What he wants to do is get rid of that and so you  will have to report the entire $100,000 of income  

on your tax return but then he wants to give a  credit, a tax credit. And so, he would maybe land  

that around 26% is what it looks like. So, you  will get a credit of 26% of your income. 26,000  

a credit against that. Now, that may be good  if you are earning less money because 26%...  

If you're in a 33% bracket, that's not going to  help you if you're a high-income earner. If you're  

single or a married couple finally in a joint tax  return making 80,000 or 100,000 or more a year,  

this is not going to help you, it's going to hurt  you. This is only going to benefit low-income  

earners that are in less than a 28% maybe federal  bracket or 24% federal bracket plus a lot of  

states have about another 7% on top of that. So,  if he goes this direction and you're a high income  

earner uh this is going to hurt you as far as what  you've been experiencing as far as tax benefits  

on traditional IRAs and 401(k)s. Now, if this  is intriguing you, I would invite you to share  

it with someone who is also a little bit confused  about what's going on and what's in the works. Or  

comment or push like. But I would love for you to  subscribe. And if you do push the bell so that you  

can be notified, I post an in-depth answer to  a financial question almost on a daily basis.  

So, let me give you my advice on what I would  recommend. If you're a little bit higher income  

earner, a little bit higher than the average  American, I would say, "Well a Roth is going to  

be a better choice for you than a traditional IRA  or 401(k)." But I've never owned an IRA or 401(k).  

Never will. I've never owned a Roth IRA or 401(k).  I never will. Why? Because my favorite vehicle  

which I call the Laser Fund... LASER is an acronym  that stands for Liquid Asset Safely Earning  

Returns. It has the 2 benefits of a Roth and 4  additional benefits the Roths will never have.  

So, why would I put money in a Roth when I can  have 300% more benefits, 3 times the benefits  

that a Roth has. See, again, a Roth  is going to be better on the back end  

if you have accumulated much of a retirement nest  egg if you're going to be in a higher bracket.  

The only time it made sense for people to choose  traditional IRAs and 401(k)s is if they were not  

savers, if they didn't save very much. Now, what's  the difference between a normal Roth and what  

CPAs and tax attorneys called the Rich Man's  Roth, the Laser Fund? Let me share with you the  

6 advantages. So, the laser fund is a vehicle that  allows you to accumulate access and transfer your  

money totally tax-free. It's been grandfathered in  the internal revenue code for 107 years as of the  

recording of this video. And folks, it is like a  tax-free sacred cash cow for people who are saving  

for retirement. So, I have earned average rates  of return of 8.2%. Some years, 10%. Some years,  

25%. But I'm talking about average rates of  return where every million dollars that I save  

can generate predictably about 80 to 100 thousand  a year of tax-free income if I live to be 120.  

Most IRA and 401(k)s and Roth cannot do that. The  2 benefits of a Roth, you contribute the money  

with after-tax dollars, okay? It accumulates  tax-free and you can access it tax-free. Well,  

the Laser Fund has those 2 benefits but it has 4  additional benefits. The next 1, number 3 is that  

with the Laser Fund, I can put in a large lump  sums. If I'm a business owner, let's say and I  

have a banner year, I'm not restricted see Roths.  You could only put in a certain dollar amount or a  

certain percent of your income. Do you know if you  make too much money, you can't even participate in  

a Roth? So, savvy cpas and tax attorneys say, "Oh,  yeah. The laser fund that Doug Andrew talks about,  

that's called the Rich Man's Roth." And I snicker.  You don't have to be rich to own one. You can put  

in 500 bucks a month. But see rich people can't  even own a Roth. They make too much money. So, let  

me give you an example. If I had a banner year,  business was just crazy. I could put in 300,000  

into a Laser Fund. You can't do that into a  Roth. But I could have put in 300. I have 270,000  

of room I didn't use. I can make up for that  anytime I want. I don't have to use the room  

in that single year with a Roth. If you don't use  the room in a given tax year, you lose it. Here's  

a big benefit: If I put in let's say 300,000,  I don't have to put in that much. But if I did,  

30 days later, if I had a business opportunity  or investment opportunity, I can access 250,000  

of that. There's no IRS penalties. If you touch  a Roth. there's a penalty if you touch the money  

within 5 years or age 59 and a half, there's  all those strings attached. I don't want those.  

The fifth benefit, you get to use indexing.  Indexing is a strategy... You ought to search on  

this channel. This allows me on my retirement nest  egg to be able to participate when the market goes  

up, the economy is going up. But when  the market goes down, I don't lose.  

Because my money is not in the market. It's not  at risk in the market. But I get my returns that  

are linked to whatever the market does. And  the sixth and final benefit of the Laser Fund?  

When you die, it blossoms in value and transfers  totally tax-free. Now, you can learn about this  

in a book I'm going to gift you here in a moment.  But I'm 68. If I died next week in an accident,  

every million that I would have let's say and a  portfolio of Laser Funds would blossom immediately  

to about 2 and a half million tax-free and  transfer to my wife, my kids, my grandkids,  

a church, a charity, whoever I want. People say,  "Wow, how much does that cost?" I go, "Well,  

nothing's free. But it doesn't cost me anything."  It's coming along for the ride. It's being paid  

for automatically with a minuscule amount of  interest that most people with IRAs and 401(k)s  

shell out in unnecessary income tax. So, let me  show you how you can learn more about this amazing  

Rich Man's Roth which I would recommend is the  best way to go. So, with current events, President  

Biden and his major tax plan changes can affect  your 401(k), you need to be ready. You need to  

reposition some or all of those contributions to  something that's going to be tax-free. So, here's  

how you can empower yourself. I would like to gift  you a copy of my most recent 300-page best-selling  

book the Laser Fund. These are flying off of the  warehouse shelves. This is actually 2 books in 1.  

This one is about 200 pages, 14 chapters, with  all kinds of charts and graphs for the left-brain  

thinker. If you're a right-brain thinker, you  learn by stories and examples of metaphors,  

you flip the book over and you read this one. This  one is 12 chapters with uh 62 chicken soup for the  

financial soul stories about how the Laser Fund  knocks the socks off of an IRA, 401(k). But you  

can use it not only for retirement but college  funding, emergency funds, working capital for  

business, real estate management, on and on and  on. You simply go to Laser Fund (l-a-s-e-r),  

Laserfund.com. You contribute a nominal amount  towards the shipping and handling. I'll cover  

the rest of that. I'll pay for the book and fire  out a copy to you. Here's to your brighter future.