Seed Or The Harvest

  
  Here is a story that my Dad came up with as a questionnaire. My dad worked in the financial services industry with as a financial planner, and he used this questionnaire/story to help illustrate wise financial planning.

• Would you rather be taxed on the seed or on the harvest?

• In the future do you see tax rates being ↑ or ↓?
• Does it make sense to pay higher taxes

• Have you ever heard of a 401k, IRA, SEP, or a Keogh?

• The Government gives incentives to use them right?

• Why?
• To make money in the future.

Let's assume that initially you invest $10,000 and it grows to $100,000. Under the circumstances you would have to pay $34,000 in taxes and you get to keep $66,000.
What if you could pay taxes to begin with and you still initially invest $10,000 but payed $4,000 in taxes today and got to keep $100,000 in the future?

• There are 76 million baby boomers
• They are the biggest tax paying base in America
• They will be the biggest tax draining base over the next decade in America.

With the government deferred income plans mentioned above there are two ages you need to keep in mind.

1. 59 1/2 is retirement age do you know what the penalty is for early withdrawals? 10% 
2.  701/2 you have to begin taking RMDs (required minimum distributions) do you know what the penalty is for not taking your RMD?

• 10%+ taxes due

That's right 50% plus taxes due


How do you like having your money in the Governments deferred income plan?

If I could show you how to  pay taxes on the seed and not the harvest I'd have a pretty good idea wouldn't I?

Come back for how to pay taxes on the seed and not the harvest.