Thursday, August 26, 2010

A New Day, A New Tax Avoidance Tip

I left off yesterday with a warning that Obama and his minions are coming for your retirement money, and how to avoid it:

"Plan avoidance tip: if it should come to fruition, plan on shutting down your 401k, shift the money into a self-directed IRA account, then you can access the money to buy cheap real estate (but not to live in). Rental income from those investments will go directly back into your IRA account, as will the proceeds when you finally sell. When you eventually DO retire, or become 59 1/2, you can take a house as an IRA distribution. Sell a house every two years, with the proceeds coming in under $250,000, and the home sale is tax-free.

If you were to do this now, you will profit immensely when the real estate market comes back--perhaps more than if you stayed in the stock market, and DEFINITELY if you chose the government bonds plan. Since this new account is self-directed, you don't have to just buy houses--you can put some back in the stock market, buy precious metals, ETFs, foreign currencies, foreign bonds, and/or foreign real estate. You can even finance a business with one, as long as you don't participate in it directly.


You can also put money back into your account after distribution under certain circumstances. If Congress made the law, Congress was sure to leave a back door to somehow avoid complying with it.

What to do about the existing employer 401k plan offering, and its tax shelter status? Nothing--according to the proposed legislation, the 401k and IRA plans will now be taxable, so you may as well shuttle off your after-tax contributions to your self-directed IRA by means of an automatic deduction, or by simply sending them a check for the monthly equivalent amount that was going to the 401k or IRA plan. Do anything but keep your money under the employer's wing, where the IRS can get its mitts on it."

There is another way to avoid being taxed on that money: DON'T MAKE IT IN THE FIRST PLACE! Take payment in things other than salary/wages, like additional benefits, a benefits upgrade, buying/upgrading health insurance, comp time, a shortened work week, additional vacation or sick leave time, or any other way you can be "paid" without actually receiving cash. Benefits aren't taxable to you, so if you can amass the same $$ amount in benefits as you formerly spent on your 401k/IRA account before it became taxable, it should all come out even (I hope).

Here's a previously-written article from the archives about working for perks and benefits--it might give you some ideas.


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