Locking up your money

Locking up your money

December 15, 2021
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Putting your money in a government-controlled retirement account like a 401(k), 403(b), IRA or Roth plan is like locking it up...

In most of those plans, the government and/or your employer will determine:

1 How much you can put in your plan

2 What you can and cannot invest in

3 If you can borrow from your plan, how much you can borrow as well as when and how you must pay it back (mess up and you'll owe taxes and penalties)

4 How long you must wait before you can access your money

5 When you must start taking out your money and how much you must withdraw (and pay taxes on - likely at higher future rates)

Penalties for running afoul of these regulations are extremely costly.

Withdrawal rules are particularly restrictive... 

You'll pay penalties for taking most distributions before you're 59½, and you're forced to start taking distributions in your early 70s – whether or not you want to or need to.

The penalty for messing up on this is 50%!

A big complaint I hear is from seniors who don't want to start withdrawing but are being forced to take Required Minimum Distributions (RMDs) from their retirement plans – and that's pushing them into a higher tax bracket. Why does the government do this? Because they can't afford to wait any longer to start collecting those taxes they let you postpone all those years.

Roth plans don't have the RMD requirement. However, a Roth plan still has restrictions about 1) how much you're allowed to put in each year, 2) how soon you may withdraw your earnings, and 3) where you can invest it.

The truth is: You Do NOT Control the Money in Your 401(k) or IRA, or Any Similar Plan.

The government has its tentacles all over it and can – and does – change the rules any time they want. Your money is on lockdown, and the Internal Revenue Service can arbitrarily impose any new restrictions or regulations it dreams up...and you have no recourse. 

Now, I’m not saying don't use them. They have helped many folks build a nest egg. But diversification reduces risk - as I learned long ago in an MBA class. Don't play golf with only a long iron and a driver.

You Control Your Money in a PRA Strategy

Unlike government-sponsored retirement plans, subject to the whims of tax law, these accounts are private contracts - governed by much-more-stable contract law.

With a PRA, the money you take out is not even reported to the Internal Revenue Service. Your privacy is protected by contract.

So when the government is looking to get its greedy claws on more money, odds are they'll go for the lower-hanging fruit in the retirement plans they sponsor and control.

In addition to being private, these specially-constructed insurance contracts are also "unilateral" contracts. This means the company can't change the basic aspects of your contract unless you agree to it.

That's the law.

As an Owner, you control the money that's accumulating in the account. That's the way it works. You decide how much premium you'd like to pay into your policy (and you have the flexibility to adjust that as your situation changes). The upper limit is determined by your income, assets, and life insurance needs; not a government-imposed limitation.

You can borrow against the cash value of your PRA any time you want. You don't have to "qualify" or beg for a loan - 'taking your clothes off' for the banker. And nothing in your - properly-constructed and funded - contract requires you to pay a loan back on a certain schedule or face stiff penalties, collections calls and dings on your credit report

.It's about control of your money! 

For a no-cost discovery call, https://www.incomeforlife.io/contact-us