In this video, we're exploring whether you should defer your taxes or pay them upfront. Are IRAs and 401ks actually benefiting you, or is it all a misconception?
My name is Caleb Williams, and this is the BetterWealth channel. We create content on money, finance, and business to help you live more intentionally. Let me be clear: this video is not tax or investment advice. I'm just here to share some ideas and thoughts to help you rethink your thinking.
When it comes to deferral, many people believe they're saving money on taxes. Advisors may refer to these as "tax savings plans." However, this isn't a true tax saving if you'll have to pay in the future.
Deferring your tax is essentially postponing it to the future, where tax rates could potentially be higher, lower, or the same. This uncertainty makes it essential to consider the trends and potential outcomes.
Imagine you have a business partner who can change the rules anytime, has poor credit, and brings little value. You likely wouldn't want to engage with such a partner.
Now, imagine you take a loan where the lender dictates terms over the next 20-30 years. Sounds unreasonable, right? Yet, many accept similar terms with qualified plans like IRAs and 401ks.
Qualified plans involve partnering with entities that can adjust tax rates and thresholds. Given the national debt and fiscal uncertainties, deferring taxes might expose you to future increases.
Even if tax brackets remain the same, inflation acts as a 'silent tax' by eroding purchasing power. This might lead to paying more taxes in the future despite unchanged brackets.
Personally, I believe in minimizing taxes today rather than deferring them. This includes utilizing deductions, credits, and strategic investments like Roth IRAs, overfunded life insurance, and real estate to lower taxes permanently.
I'm not here to incite fear of the government but to encourage strategic thinking and awareness of potential financial headwinds. Consider all factors to ensure growth without unforeseen constraints.
Ultimately, tax deferral is not necessarily a tax-saving vehicle but a way to delay the inevitable. Consider your strategies carefully, and focus on maintaining control over your financial future.
Let us know your thoughts or if you'd like more clarification. Remember, being proactive and informed can make all the difference in managing your wealth efficiently.