2013 New Year resolution: Prosper in Taxmageddon
By Paul Cross
Annuity National Brokerage Co.
As the clock struck midnight on New Year’s Eve, we saluted, toasted and wished everyone a happy and prosperous New Year. Personally, I wish everyone success in riding out the tragic shock waves of the fiscal cliff. Raise taxes and cut government spending. There was no other possible solution to the fiscal cliff issue. Thus far, our government has only increased taxes and implemented new venues of taxation. So, how is it possible to enjoy a happy and prosperous New Year?
Here’s one way: Resolve now to stop losing money to the IRS and stop losing money on Wall Street.
Let’s remember and reinforce Judge Learned Hand’s words: "There is nothing sinister in so arranging affairs as to keep taxes as low as possible.”
And President Herbert Hoover’s words, “Blessed are the young for they shall inherit the national debt.”
Once, again the young will inherit the national debt; this time larger than ever. So, what can we do for the young? Help families grow and retain family legacies and help them recall and implement the rules, the secret and the magic of wealth accumulation.
Rule No. 1: Learn to live on less than you earn.
Rule No. 2: Convert 10 percent into capital and never touch your capital until its earnings exceed your annual income.
Rule No. 3: Keep only emergency money in alligator accounts. Conventional savings accounts, CDs and money markets are alligator accounts. The alligator eats the heart out of your savings in the form of income taxes. And the IRS owns the alligator.
Keep your serious nest egg dollars in safe, tax-deferred instruments like quality annuities. The annuity develops an automatic re-investment cash flow with tax dollars. Remember, taxes and inflation compound each other in the wrong direction.
The secret of wealth accumulation is to simply pay yourself first. Convert 10 percent of everything you earn into capital and energize the growth of your money with tax dollars, not with risk, and then pay bills and spend what’s left. It simply doesn’t work any other way.
The magic of wealth accumulation is the compounding growth of compound tax-deferred interest over periods of time.
Albert Einstein said, "Compound interest is the eighth wonder of the world." Einstein also said the most difficult thing in the world to understand is income tax. How much more difficult and costly has it become since his time?
Politicians are no longer wise men; wise men are people like Albert Einstein and Samuel Johnson who said, “It is better to live rich than die rich." But he also said that the first years of man must make provision for the last. George Washington once said, “To contract new debt is not the way to pay old debt," and, “The Constitution is the guide I will never abandon.”
Just think where we would be today if our government could master the rules of wealth accumulation and save and invest 10 cents on the tax dollar. It’s time to take a bite out of the IRS and grow tax dollars into family wealth.
Is there an expressway to wealth accumulation? Yes. IRAs and qualified retirement plans are Americans' expressway to wealth accumulation.
Let’s resolve now to make 2013 our most prosperous and rewarding year ever. When things get tough the tough get going — it’s time to get going.