The IRA/401k problem

By Bob Widmer

Aproximately 33% of Americans have an IRA to begin with. I think you will be surprised when you finish reading what I have found online about the problems you can and will experience with this form of investing. All of the plans that we, with Freedom Equity Group offer, the money you invest is taxed at today’s rate, and  the growth of your money years down the road is paid out  TAX FREE! Think of it this way. Would you rather pay the tax a small bag of seed before you ever plant, or pay the tax on the entire crop that you will harvest at the end of the season?

Before I spend a lot of your time on IRAs/401k’s, the first subject I want you to know about are the fees you will pay every year. A study found that 401(k) participants pay an average all-in fee of 2.22% of their assets, but there is a wide range between from 0.2% and 5%. ( We have found the average fees unfortunately are more like 2.5% to 3% per year, eating away at your retirement investment. Freedom Equity Group has solutions for these high percentages.

IRAs come in a few different varieties. First there's the traditional IRA, which lets you save up to $5,500 a year (or $6,500 if you're aged 50 or older) and deduct the contributions from your taxable income (the seed). Your withdrawals, however, will be taxed during retirement (the harvest), which can be a significantly expensive drawback. You won't know what the interest rate will be in the future. (See chart below)

The next thing you need to consider is that you will be penalized for withdrawing funds from a traditional IRA before reaching age 59-1/2 without having to pay the 10 percent penalty. However, regular income tax will still be due on each withdrawal.

Traditional IRAs impose required minimum distributions that you'll need to start taking once you turn 70-1/2. The exact amount you'll need to withdraw will depend on your account balance and life expectancy at the time, but you should know, if you do not take your required distributions, you will be penalized to the tune of 50% of the amount you failed to withdraw. (     {That's horrible.}

Traditional IRA withdrawals are taxed at retirement (the harvest), so that extra income could (and I say would) result in higher taxes than you would probably want to pay (see chart below). Furthermore, once you remove money from your IRA, it can no longer benefit from tax-free growth. While you can take that money and reinvest it in a traditional accounts, you will pay taxes on any gains you realize along the way. With a traditional IRAs or 401(k), you invest with pretax dollars (your seed) and pay income tax when you take money out in retirement (your harvest). You then pay tax on both the original investments and on what they earned. Sounds like a government trap to me.

A Roth IRA is a better alternative than the standard IRA and the 401k, 403c, but I will say this about a Roth. In choosing between Roth and traditional IRAs, the key issue is whether your income tax rate will be greater or lesser than at the present once you start tapping the account’s funds? Without the benefit of a crystal ball, that is impossible to know for sure; essentially, you are forced to make an educated guess. For instance, Congress could make changes to the tax code (see chart) during the intervening years. There’s also a time factor: If you are opening the Roth late in life, you need to be sure that you will be able to have it for five years before starting to take distributions in order to reap the tax benefits. (

So here is my question. Will you likely pay a higher or lower tax rate in the future considering we now have a 22 trillion dollar national debt. How do you suppose we will pay for infrastructure, Medicare, the military, and what ever politicians want to spend our money on. Just look above at that rate from 1950-1960! What will it be in 10 years? Your harvest may take a giant hit.

I hope this has been educational. Not only do we want to provide a way to get you out of debt, and save you tens of thousands of dollars in interest on various debts, but provide  financial vehicles that cannot lose your hard earned money in the markets when they go below +0.25%, and also provide you a decent return on investment of as high as 14 ½% through the life insurance industry. The term is call indexing. (Click here) to see how indexing works.

If you have life insurance that is not "indexed" such as ordinary whole life, you need to watch this video. If your life insurence does not pay out when you get too sick to work, you need to watch this video. I dare say you can't beat what we offer.

As for me, I use both of the programs we offer, and in addition, the annuity side of our business comes with both a death benefit and some amazing riders. Compare that to your IRA/401k.

Sincerely, Bob Widmer