All Forum Posts by: Vince Beusan

Vanessa, I have set up Podio and customized the tool through viewing YouTube 'how to' videos for systemizing, to help keep track of wholesale leads, calls, potential deals, marketing etc.

@Scott Trench   Thanks for the reply.  I agree with @Account Closed and his approach.

Let me expand upon my previous example and share with you what most people should learn about the 401(k) plan.  Investors that invest for capital gains are taxed at 15% when holding an investment for 1yr & 1day and/or longer.  401(k) plans are savings plans NOT investment plans.  When the money is withdrawn upon, the 'bait & switch' being sold by the government is the 40l(k) is an investment vehicle;  401(k) plans are taxed at ordinary income (35%), not 15% as would be an investor who is investing for capital gains.

I'll expand upon my example below;  

Let me give you one last example: Page 119-120 from "401(k)aos" by Andy Tanner. "Age 20 investor with 45yrs to go to accumulate retirement, and then another 20 years to go before death mercifully brings an end to his or her own life. So this is 65yrs of investing putting $1000 at the begining of that time earning 8%. That $1000 will grow to $140,000 in a 65yr period. Now, enter the financial system (the mutual fund system) they will take 2.5% out of that return so you will ha gross return of 8%, but a net return of 5.5%, and over the same time period your $1000 will grow to $30,000. In other words, $110,000 goes to the financial institution system, and $30,000 to you, the 'investor'. Think about that."

Now, after you get past the shock that you have only $30,000 in your account after 65 years of investing $1000 per year; it's time to draw it out.  

$30,000 x 35% (ordinary income tax rate) = $10,500 paid in taxes.   The saver is allowed to keep $19,500.

However, if the same money was taxed as a capital gain increase the 401(k) profit would look like this: 

($1,000 initial investment x 35%) + ($29,000 x 15%) = $4,500 paid in taxes.  The investor in this scenario would keep $25,300.

To summarize, in an effort to defer $350 in tax today on an investment of $1000, this investor will wind up paying $5,800 more than needed on the original $1,000 put into that 401(k) account.

You can pay up to 20% more in taxes on your 401(k) money than you will on regular investment capital gains.

There is more, and this is a great topic of discussion.

@Scott Trench thanks for coming up with this topic.

I believe in getting a really good financial education, learning about money.  The danger today is too many people are ignorant as a good financial education is not provided in school.  It is up to us individually to improve our own financial education.

Depending upon how one uses your 401(k) plan it could be really beneficial (what I mean by this is maximizing the $52,0000/year self employed individual 401(k) and buy discounted notes with the money) and lower your taxable income, or it could just be a savings plan that makes the institutional account holders rich that distribute your income among various mutual funds.

For those seriously interested, I highly suggest reading the book '401(k)aos' by Andy Tanner.    I have learned a lot about the deception and ignorance one should realistically expect from 401(k) plans.  401(k) plans are savings plans, not investment plans.  The plan operators lie to the saver by claiming it is your fault you can't retire because YOU didn't put enough money away for retirement.  Well, suppose you maximize your plan or may that may be true - you did not maximize your investment money, however the real question is the 401(k) plan the right vehicle. 

Now it takes no skill or financial education to put money into an 401(k) plan;  you put it away and forget about it.   Let me put it to you this way, in Las Vegas you can chose to gamble on many different slot machines, all of which the casino keeps a percentage of every dollar poured into the machine.  Everyone knows there is more money going in than is coming out.

Just like the slot machines, the 401(k) system is a very simple machine.  It' a machine that consistently transfers money from your account to a financial institution that sponsors the plan in which you are enrolled.  Like the slot machine, this plan is completely legal.

Also, in a 401(k) plan the saver is financially dependent upon on an institution to provide financial security.  401(k) plans have created an entire generation of people who think they are 'investing' without any understanding.  It is good to have financial advisers and other trusted experts in your life, I do have a CFP and they have a place in my overall plan, however, when one hands over decision-making power we are handing over our financial independence.  The individual needs to be the ultimate decision-makers.

How many peoples 401(k) were wiped out during the 2000 dot-com bubble, or cut in half?  Who was told they were diversified?  From this point on, I'm against mutual fund investments, it's not for me as I understand how vulnerable we really are in mutual funds.  All while fund managers pushed to invest in their mutual funds to help manage risk and diversify to prevent big losses, when clearly the opposite was true.  Why does this happen then?  The simple answer is money; there is A LOT of money in the 401(k) mutual fund business.

This is another reason I have chosen real estate & not RE through self-directed 401(k) investments either.  There are so many benefits of owning real estate.  We know it's a tangible valuable asset.  When I buy real estate I buy insurance for to protect it.  Now ask your financial adviser if you can buy insurance to protect your 401(k) investment and they'll think your nuts.   

Man, this is a long post, but worth it;  

Let me give you one last example:  Page 119-120 from "401(k)aos" by Andy Tanner.  "Age 20 investor with 45yrs to go to accumulate retirement, and then another 20 years to go before death mercifully brings an end to his or her own life.   So this is 65yrs of investing putting $1000 at the begining of that time earning 8%.  That $1000 will grow to $140,000 in a 65yr period.   Now, enter the financial system (the mutual fund system)  they will take 2.5% out of that return so you will ha gross return of 8%, but a net return of 5.5%, and over the same time period your $1000 will grow to $30,000.   In other words, $110,000 goes to the financial institution system, and $30,000 to you, the 'investor'.  Think about that."

@John Thedford   Bingo!

"Remember, there are really four ways you are going to make money in RE. Appreciation. Cash flow. Debt reduction. Tax benefits. Add them all up, and you will realize that the 2% GUIDELINE is just one way some investors try and determine if a property will meet their purchase criteria. Don't let that one guideline be your determining factor whether to make a purchase."

Real Investors know how to run their numbers.

Very interesting discussion, thanks for the feedback.

Well said @Will Barnard . 

Freddie/Fannie, which is an appendage of the Federal Government, are morons by design.   The government creates the problem, in this case the 'housing bubble' of 2007-08, lowers standards for 'all unqualified, but breathing buyers to get in' through the Carter ERA with the "Community Re-investment Act of 1977" and the claims to 'fix' the problem with more regulations later i.e.- the monstrosity of Dodd-Frank regulations that it is packed with.

The masterminds in government create regulations to manage 'we the people' more and do not fix any issues the bill was intended to solve.    As they say, learn history as it tends to be repeated.  Be cautious, as this is all too familiar. 

You must learn that the rules of money have changed.

On June 5, 1986 H.R.3838 (Tax Reform Act Of 1986) As Reported By The Senate Committee On Finance, was passed into law.  This is a (63) page bill that was passed during the Reagan Era.

This law was passed by the United States Congress was to simplify the income tax code. The Tax Reform Act of 1986, commonly referred to as the second of two Reagan tax cuts, lowered the top tax rate from 50% to 28% and raised the bottom tax rate from 11% to 15%. This was the first time in U.S. income tax history that the top tax rate was lowered and the bottom rate was increased at the same time. The act also mandated that capital gains would be taxed at the same rate as ordinary income.

Reference: On page (12), Title II. Accelerated Cost Recovery Systems & Investment Tax Credit, section A & B.

Prior to the Tax Reform Act Of 1986, high income earning professionals (doctors, lawyers, Sales professionals, and others) would invest in property to accelerate depreciation and lower their taxable W-2 income, to pay low to no taxes, while at the same time RE markets appreciate.  The depreciation time of property was changed, and business professionals were no longer able to purchase property to accelerate the depreciation losses to offset W-2 income. The cost of real property is recovered using the straight-line method over 27.5 years for residential rental property, and 31.5 years for nonresidential property.

You can read the law at:

https://www.jct.gov/publications.html?func=startdo...

Thank you for the referral @Scott Williams