Biden | Major Changes To Your 401(k)

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

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Biden-major changes to your 401k.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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their house. They don’t have that deduction in retirement. They do not have children if they
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moved back home as adults. You can’t deduct them anymore as dependents. You’re not contributing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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next. So, I’m going to simplify this. Let’s say that we had a lump sum of $150,000
Rule of 72

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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likely be lower?” I get nothing but crickets. “How many think they’re going to be the same?”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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,

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

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

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

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

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

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

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

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

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

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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,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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