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There might be a small fee associated with establishing millions and millions of tax-free capital gains and income

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shelby

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For me, the mention of a retirement plan has historically meant what someone might be doing with their time after they quit working to pay the bills as opposed to an answer to the question of where was their income going to come from after they no longer received a W-2 or Schedule K. However, since becoming a member of the IWMS I’ve come to understand that a retirement plan in our vernacular is actually just a passive income generator. A “smart” retirement plan is one that does so without generating a significant tax burden.

Being a sole proprietor a few years ago I took the simple step to set up a SEP IRA. This allowed me to defer some income tax while also giving me a higher limit on the annual contribution then a regular IRA. A Roth would have been nice but my income level was too high and the annual contribution limit was so low that I didn’t find it appealing. The SEP IRA still sounded good to me because I had bought into what I now understand as the typical retirement failure plan.

The typical retirement failure plan is based on the idea that it’s smart to sock money away in an IRA or 401(k) so that when we’re at retirement age we can then withdraw the money and pay less tax on it because in retirement we’ll all be a lower income tax brackets. However, if you sit back and think about it that suggestion is actually an “in your face” plan to fail. Why on earth would one ever plan on being in a lower income tax bracket? Certainly that happens to many people but to me “intentionally planning” to move towards a lower income tax bracket is akin to “intentionally planning” to fail.

Then, back in the late 90’s I read Robert Kiyosaki’s Rich Dad, Poor Dad. Clearly, planning on being in a lower income tax bracket is a Poor Dad strategy and why would anyone base anything on that way of thinking? I guess this why most people in America struggle financially. Poor Dad thinking is common.

Then along came the perfect economic storm. Suddenly there is an inexpensive asset (IQD) that could be placed in a Roth account which would then see an appreciation of several orders of magnitude (10 to the 3rd power to be more specific) which would more than make up for the low contribution limits.

However, I had a problem. My business was struggling based on the general economy and I had already spent as much money as I could afford to for purchasing my dinars. When the IWMS consultants first floated the Roth-IQD concept by me it sounded good but I really didn’t have any money left. However, they had several suggestions. To me they sounded crazy but I’m smart enough to realize that they were only crazy because I’d never heard of them. It did take several weeks of personal study and research to finally come to grips with the incredible benefit of having IQD’s in a Roth-type of plan and get to the point that it really needed to be part of my IQD Allocation plan.

Here is what made sense to me. Working with the IWMS consultants I was able to open up a “Self-Directed Roth 401(k) retirement plan”. While doing my homework it became clear that this was what I needed to establish to maximize my return AND minimize my tax burden. However, don’t expect your local Wells Fargo to understand it.

Now opening the account is one thing, funding it is another. Since my cash flow is limited I looked into rolling over some money from my SEP IRA into the Roth 401(k) but my CPA determined that this isn’t allowed. There are some easy ways to Roth convert SEP IRA funds for use in IRAs but no easy ways to roll the money into a “Self-Directed Roth 401(k)” plans.

However, there is a “Hard” way to get the money into the Roth 401(k) plan. It’s hard because there is a fee, also known as a penalty. But then I remembered, this is the perfect economic storm. I’m looking at a 1000% increase in my money when the IQD revalues. That kind of made a 12.5% fee on the $4000 I needed to purchase more IQD seem like a pittance. Shame on me for almost kissing away millions and millions of tax free capital gains and income because I almost balked because of an early withdrawal fee of a few hundred dollars from my SEP IRA.

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