Blog | Personal Finance

Don’t Let Taxes Steal Your Dreams And Retirement

Plan To Retire Rich Not Poor

Robert Kiyosaki’s real father, his poor dad, died broke, and worse, lamenting the many dreams he didn't accomplish. Robert says, “My poor dad put his trust in a system and a lifestyle that provided the least financial security—that of an employee.”

The reason why Robert made sure to include the word “employee” at the end of his statement is because employees are taxed at a much higher rate than that of an investor. Therefore, an employee spends their whole life working only to retire with very little in their pocket.

The sad news about retiring is, you have a challenge ahead of you if you plan to retire the way our parents did. This is especially true if you are using the same methods to retire that our parents used—relying on pension, profit sharing or 401(k) plans.

How The Basic Government-qualified Plan Works

You and your employer decide how much you put into the plan each year. Under a typical plan, you’re not taxed on the income that you put into the plan each year. This has the same effect as if you received the income and then received a deduction for putting it into the plan. The money in your plan is then invested in some type of government-approved asset. Most governments require you to decide between mutual funds or an account that earns interest, called a guaranteed contract.

Your money stays in the retirement account until you retire. When you eventually take the money out, the government taxes you at ordinary income tax rates. The idea is to postpone tax on this income and related earnings until you retire.

The Retirement Plan Lie

A tax-deferred savings plan doesn’t sound all that bad. Your money tucked away earning interest until you’re ready to spend it, actually sounds pretty good. Well these plans are, in my opinion, stealing from your wealth and you shouldn’t use them.

Here’s why:

1. Retirement = higher tax bracket: Tax brackets rarely keep pace with real inflation, so you could find yourself in a much higher tax bracket just from inflation.
2. Tax penalties: In most countries there are significant penalties for taking money out of your retirement account before you reach a certain age. These penalties are in addition to the tax you will pay when you take it out.
3. Leverage: business can be a great investment for leverage. You can borrow to improve your return on equipment. You can borrow to purchase the business. And you can leverage your time by hiring employees. But in one of these traditional investment plans, banks simply don't like to lend money to corporations and to individuals.

Uncover Tax Free Wealth

The average person is letting the government steal money from them, because they have no idea there are actions and programs you can use to LEGALLY keep more of the money you earn. The bad news is the government taxes employees and self-employed people worse than anyone. The good news is you can change this before it’s too late.

Now, obviously, there are many loopholes to use to help you keep more of your money, but the key is to find an investment that gives you more time and more money than traditional retirement vehicles.

As I wrote in a previous blog, entrepreneurs and investors get all the breaks. So it’s obvious that the two investment classes that give great returns and provides tax shelters are business and real estate. If you learn how to invest in these two asset classes, you’ll not only reduce your tax burden, but you’ll also create cash flow.

To learn more about building massive wealth by permanently lowering your taxes, get my book Tax-Free Wealth now.