***2. It conditions people to accept a horrible, horrendous fate of working for 4 decades in order to enjoy their savings during their weakest years – years where they have no idea what their health will be like or if they’ll even be alive.
***3. It convinces people that they will pay lower taxes when they are older.
This last one is the worst. I remember hearing this from a school counselor at 15 years old, and I couldn’t believe it. To actually plan to be in the lowest tax bracket… Or as I saw it, a plan to be a low-income senior citizen… F that!
Here’s the real scam of the whole thing summed up in this chart.
Income taxes are the lowest they’ve been in decades!
And prior to the 1980s, you have to go back to 1931 to find them this low.
Here’s another chart to reflect on, as CPAs and the conventional finance community recommend you “avoid” paying low taxes.
We are less than a decade away from seeing the U.S. actually make trillion-dollar interest payments on the official national debt.
Keep in mind that we don’t account for our off-balance sheet items, like Social Security payments owed to 75 million baby boomers!
$21 trillion is the number you hear about, but it’s really closer to $200 trillion in total liabilities.
The U.S. Federal Government revenues pay for our entitlement programs and the interest on the debt.
All other programs, from our military to our Congress, are paid for using borrowed money.
This is completely unsustainable, and as I’ve warned before, many of the socialist groups rising up are downright scary if and when they get in power.
So the bottom line is your taxes are going UP in the late 2020s and by the end of the 2030s, we could be paying more than 50% of our income just to the Federal Government.
Now, consider the tax deduction from a 401(k), SEP-IRA or IRA, or any tax avoidance vehicle… WHY?
Why avoid paying low taxes today to speculate on the future, when in all likelihood you’ll be paying a much higher tax rate?
Imagine borrowing money from a bank and the banker telling you he’ll decide what your interest rate will be in 20 years. You wouldn’t take that deal in a million years.
Yet that’s exactly what people are doing when they max out a 401(k), only it’s even worse than giving a banker a blank check – it’s the IRS!
It’s the IRS and the voters of 10, 20, or 30 years from now deciding what you get to keep.
In my opinion, everything about retirement is a misallocation of time, energy, and capital.
Financial independence can be done within 5 to 10 years by dramatically cutting expenses and focusing 90% of your investible assets on cash flow by bringing in multiple streams of income.