Should You Use A Tax Deferral Plan To Grow Your Wealth

 In this video, we're gonna be talking about tax deferral Whether you should defer your tax or pay your tax up front whether IRAs 401ks have IRAs or actually a good idea If you're actually saving money Deferring your tax or if it's all a joke My name is Caleb Williams, this is a better wealth channel and we make videos on money finance and business For the sole purpose of helping you live more intentional and I want to make myself very very clear That this video is not tax advice. It's not investment advice. I'm not telling you what you should do with your money This is just a random person on the internet sharing some ideas and thoughts to help you Again, maybe rethink your thinking so that you can be more intentional in whatever you do So when it comes to deferral a lot of people think that you're just saving money They actually call this like tax savings plans. It's like well my my CPA or my accountant Puts told me to put my money in this account and I would be saving taxes And I just want you to pump the brakes a little bit because it's not a true tax savings If you're having to pay it in the future and in most cases when you defer your tax You you could just also say that it's a postponement You're literally just saying I'm gonna postpone my tax today to the future and that that potentially Could go into the equation because the future is unknown and the future could have more taxes or could have less taxes It's it's unknown But we can look at trends and we can maybe say you know What does the future look like and what are the trends telling us and in a lot of cases even with that? It's like, okay There's maybe a lot of different unknowns when it comes to that Before we get into some of the pros and cons of deferring your tax I want to share a quick story and the quick story is this you and I are business partners Okay, and and I essentially tell you that you know, I can you know, you know I could do essentially whatever I want I can change my equity state at any time and I can do whatever I want with the money And in fact, I have a horrible credit and in some cases you would say, okay You can change your equity stake at any time you can change the rules you have a horrible credit You really bring very little to the table. No, I don't necessarily want to partner with you So I want you to think that you don't necessarily wouldn't partner with someone in that scenario Scenario number two is I'm a bank you come to me and you want a loan I give you a loan and I say, you know what? Here's here's here's your money. Don't worry about paying me now But just in you know in the next 20 30 years, I'll let you know what I need I'll let you know what I need, you know to earn and you can just pay me whatever whatever I tell you There'd be no way that you would take that loan It would be irresponsible for you to take that loan and in fact it sounds crazy To just share those two examples like why in the world would you Have a business partner that could change their equity state at any time has bad bad credit is spending out of control And why in the world would you take a loan to someone who could just change the rules on you every single day? Well, majority of you watching this are actually doing an agreement. It's called a qualified plan It's called a traditional IRA or Traditional 401k a sep IRA essentially you're saying hey I'm gonna get some type of benefit and I don't really know what the future holds and they and the government who you know Qualifies these plans can change the rules and yeah, the government's not necessarily being the most fiscally responsible But you know like they're they're not gonna, you know go back on their word or they're not going to you know screw me They're there. I'm sure they're gonna be fine That's a lot of us are literally business partners The idea of a qualified plan is you're partnering with an entity that can change their equity state IE they can change the tax rate or threshold And they really control You know their tax revenue and when you look at our country with 30 trillion dollars in debt with a Trillions of dollars of deficits of a massive unfunded liability you start scratching your head and saying okay Fundamentally I know we're gonna get into the math and we could make the argument but fundamentally Is it a bad idea to kick the can to postpone to defer to save money on tax? To a date where we have no idea what the future is gonna hold We have no idea what taxes are gonna be we have no idea who's gonna be present with the rates and all the all that There seems to be another Risk that that again historically we can look back and there's been times where the top tax brackets been over 90% We always say like I don't know if we're gonna go back there But when you look at other countries and you look at where we're trending it's hard to imagine Taxes going down so here's here's the plain and simple answer And this is the making the principle of should you defer your tax or not? And and it really comes down to this if tax rates and thresholds are exactly the same it does not matter They're exactly the same it does not matter You could pay your tax up front and into a Roth IRA and grow your money and then you know pay It's the same as you know tax savings your money today And then you know paying tax on the on the lump sum in the future It's it's it's the same if taxes are lower in the future You'd be better off deferring than doing something like a Roth IRA or like a overfunded life insurance policy like you would be better off Actually getting the tax savings because it's a true tax savings You're not paying any money and right now and over 30 years the tax rates drop And so it's it's a good thing and think about it when these deferral plans really came about look at what the tax rate was And it will make a lot more sense now We're in a situation where relatively tax rates are pretty low when you look at history And then you just look for the future and you just say is it possible that tax rates or the threat Threshold could change where I have to pay more taxes and let me just prove a point on why I think even if taxes Remain the same with the same brackets. You're gonna pay more in tax It's a thing called inflation inflation is is something that it's essentially because the printing of our money We need to spend more money just to maintain our current lifestyle So today a hundred dollars versus you know in 30 years that hundred dollars has way less spending power So two hundred dollars would would you know represent what a hundred dollars would be? Today so think about it for those of us that are making more money that are getting a raise like we can you know be really proud of Ourself, but at the end of the day You're making more money, which you need to pay it might bump you up to more taxes But at the end of the day your three or four percent raise is actually not making you richer It's just maintaining what you're currently spending today So if that makes any sense inflation is actually a silent tax for many reasons But one of the reasons is it's just bumping us up to have more artificial money But as a result we're paying more tax But the value of the buying power of our dollars not getting us anything that is one example of This silent tax that even if taxes remain the same, which I don't think they will even if they remain the same Will make us have to pay greater taxes in the future. I think fundamentally it's this I'm not a conspiracy theorist. I love paying My fair share of taxes and I think we should all have the mindset of you know, I'm not trying to cheat out any system But I also think when it comes to being intentional when it becomes to being a good steward when it comes to this concept of control We really need to look at this whole environment and say yeah We're very focused on making sure that we invest our money so that it grows But we also have to realize that there are other institutions that we might think are friends that ultimately are massive headwinds And and could come off their money and take our money and change the thresholds and change the rates or change the rules To where maybe they didn't raise taxes, but they got more taxes and and so I just think it's it's it's something that is Very fundamental to think about from the standpoint of what the future looks like making sure that we can be in control personally Personally, I have a belief that Taxes are gonna be higher and that deferral plan is not a tax savings plan. It's just kicking the can down the road So what would I do instead? And again, this is not tax advice. This is not investment advice What I would do instead is I would not defer my money I would look at trying to find all the tax savings I can today to permanently reduce my taxes This could be deductions. This could be finding credits. This could be finding other entity structures This could be looking at legal loopholes and trying to my very best to legally permanently reduce my taxes Okay, then you have a tax savings Then I would look for things like put my money in a Roth IRA over fun life insurance Maybe invest in real estate or invest in other Investments that I could use things like depreciation to lower my taxes ultimately deferral And grow in and deferring your money Is is a catch 22 and at the end of the day I don't want to have a chunk of my money where I don't know how much is my money and how much is the government's Let me know if this makes sense. Let me know if you have ways of Clarifying this again. I'm trying to be as unbiased as possible if you are nearing retirement There's there's a lot of strategies you can do and I don't want to again Freak any one out that the government's gonna take all all of our money I just think if we are trying to grow our wealth We need to think about all parties and I see so many people, you know being focused on You know rates of return and are making deals But at the end of the day aren't realizing that the wrapper itself could ultimately be a jail cell For your money and determine what you do 20 30 years from now and I just You know, I look at history and say man, I really haven't seen many areas where You know, the government has stepped in and actually made us better off for having wealth in a lot of cases Once they once they they get their foot into something They want more and more and more and more regulations And so that is why I'm a big fan of Ross of life insurance of permanently reducing taxes and alternative investing where you can grow your wealth In a tax advantage way