3 ENEMIES OF MONEY

When it comes to financial planning, many factors need to be considered when making crucial decisions with your finances.  Unfortunately, very costly mistakes are made because of 3 topics I like to call "Enemies of Money".  Let's take a look at these 3 topics:

• Taxes
• Inflation
• Procrastination

First Enemy of Money:

TAXES 

There are 4 MAJOR Retirement Taxes:

• Social Security Taxes
• Capital Gains Taxes
• Interest Income Taxes
• Estate Taxes 

Social Security Taxes 

Uncle Sam determines how much you pay in Social Security taxes by these 3 criteria:
-  Social Security Income
-  Pension Income
-  For each $$$ that exceeds:  

Married couple:  $32,000 | Single: $25,000 | Tax Rate: 50% 
Married couple:  $44,000 | Single: $34,000 | Tax Rate: 85%


Capital Gains Taxes

This is a type of tax that is levied against capital gains incurred by individuals and corporations.  The capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price. 

A couple of examples would be either the sale of real estate or cashing in stock where a profit is realized.

Interest Income Taxes 

Interest income is earned on deposits at banks and credit unions, on money market funds, on bonds, and on loans such as seller-financed mortgages.

Interest is taxed as ordinary income, subject to the ordinary tax rates. 

Estate Taxes 

A tax levied on the net value of the estate of the deceased person before distribution to the heirs.

In 2014, the exemptions are:

• $5.34M exemption for an individual
• $10.68M exemption for a married couple (see chart below for current exemptions)

 

Let me show you how to minimize all of those taxes. 

2nd Enemy of Money

INFLATION

Inflation is a general increase in the overall price level of the goods and services in the economy.

Average rate of inflation per year since 1913 is 3.24%

Let me show you where to put your money to beat the rate of inflation.

3rd Enemy of Money

PROCRASTINATION

Here are the 6 Steps of Procrastination:

• False Security
• Laziness
• Excuses
• Denial
• Crisis
• REPEAT...

Yesterday you said "Tomorrow"...  Tomorrow is here and now.  Let's get started and start saving today!

To recap, the 3 Enemies of Money are:  Taxes | Inflation | Procrastination

Let's look at solutions on how you can eliminate the 3 Enemies of Money...

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On average, most people can save $300 - $500/mo.

Once they save that $$$, where do they put it?  Let's take a look at 3 very different options to see what happens to that $$$ once they are in those options:

Banks | Insurance | Professional Money Managed Accounts...

You have 3 tax options for your money: TAXABLE | TAX DEFERRED | TAX FREE.  You can have one or two of these options, but not all 3.  Let's see what tax categories the Banks, Insurance, and Professionally Managed Accounts fall under...

 BANKS

• Checking / Savings / CD / Money Market
• Rate of Return: less than 2%.  Does NOT beat the Rate of Inflation
• Benefits include Liquidity / Guaranteed by the FDIC
• Income Interest TAXABLE now at the end of the year

 INSURANCE

• Term / Whole Life / IUL / UL / VUL
• Rate of Return: can average between 2-15% based on the type of plan, with historical returns consistently beating the Rate of Inflation
• Benefits include TAX DEFERRED Growth / Death Benefit Protection / Tax Advantages (no taxation on cash value life insurance IRC 7702) with TAX FREE distributions / Safety of Principal with Guarantees

PROFESSIONAL MONEY MANAGEMENT 

• 401(k) / IRA / Mutual Funds / Annuities
• Benefits include Diversification / Professionally Managed
• Income Interest is TAX DEFERRED but TAXABLE at the time of distribution
• Money is potentially at risk of loss if invested into the Stock Market. Potentially can beat the Rate of Inflation in an up market, but will not beat the Rate of Inflation in a down market.

All 3 of these options fall under the following categories:

TAXABLE: Pay Tax NOW... Stocks | Mutual Funds | Savings Accounts | CDs

Deposits and contributions are made with after tax $$$ and are TAXABLE at the end of the year, when you will get a 1099 Form to pay tax on your gains.

TAX DEFERRED: Pay Tax LATER... 401(k) | Traditional IRA | Annuities

Qualified Plans use pre-tax $$$ and gains grow TAX DEFERRED.  Distributions prior to age 59 1/2 will incur an IRS Early Withdrawal Penalty.  Mandatory withdrawals must be made at age 70 1/2 or incur tax penalties up to 50%.  Distributions are 100% TAXABLE.

TAX FREE: Pay NO Tax (Tax Advantages: Cash Value Life Insurance)

Premiums are paid with after-tax $$$ with the cash value growing TAX DEFERRED, guaranteed rate of return with on cash value with Whole Life, potential market-like returns without risk of loss with Indexed Universal Life, cash value distributions are TAX FREE via the loan provision (IRC 7702), death benefit is income tax free, cash values are private $$$ and in most states protected against liens and creditors, and finally provides protection against dying too soon, living too long, or becoming sick or disabled.

So the question is:

Do you want to put your money into an account that is TAXABLE at the end of the year and does NOT beat the Rate of Inflation?  or...

Do you want to put your money into an account where your money grows TAX DEFERRED, but is 100% TAXABLE at the time of distribution? Remember, your money is also at risk of loss in a down market.  or...

Do you want to put your money into an account that grows TAX DEFERRED, gives you safety of principal with guarantees, protects you against loss in a down market, historically beats the Rate of Inflation, and gives you TAX FREE distributions? 

The answer is obvious:

Cash Value Life Insurance.  This will give you the best tax advantages to minimize your tax liability, cash values grow TAX DEFERRED, the rate of return consistently beats the Rate of Inflation, and with the loan provision, TAX FREE distributions.

Let's get started today and DO NOT PROCRASTINATE!  Remember, you have to qualify for life insurance, and the earlier you start, the less the costs of participating while maximizing your ability to realize compounding interest.  Time is more expensive than money.  Do not procrastinate.  Let's get started today!

John L. Nunes
President & CEO
J. Nunes Financial
john.nunes@jnunesfinancial.com 
510-629-3568