Why It’s UNECESSARY for Retirees to Relocate Because of State Income Tax

Why It’s UNECESSARY for Retirees to Relocate Because of State Income Tax

Allow me to clarify: I’m not trying to suggest to retirees where they should retire. Rather, I’m doing the exact opposite – empowering them with the freedom to choose to retire wherever they’d like, instead of feeling they MUST relocate for the mere reason of avoiding outrageous state income taxes. 

In my humble opinion, traditional financial advice has been dead wrong for decades — and this very subject proves my point. People spend all their lives working, planning, and saving for retirement. And then, just when they should have the freedom to enjoy the fruits of their lives’ work, they are faced with deciding whether to move to a different state for the sole reason of avoiding income taxes so that they can have more spendable income. In fact, certain members of the financial press proudly direct “endangered” retirees toward tax-friendlier states (and away from the tax hawks) so that they can keep more of their money.

Here’s the shocking thing, though. It is completely unnecessary to move just so you can enjoy your retirement income tax free, both on the federal and state levels. Unbelievable, isn’t it?

It’s no secret that Title 26 — which is a fancy name for the U.S. Tax Code — allows every American taxpayer who so wishes to fund specific nonqualified vehicles. These funds can then be accessed later (in this case, for retirement) without creating what the IRS considers a “taxable event,” meaning every penny at the federal level will be income-tax free. What’s more, since funds accessed in that manner are not counted as “earned,” “passive,” or “portfolio” income under the 1986 Tax Reform Act, they are not factored into calculation of one’s “provisional income” — meaning, they will not affect taxation of social security checks in any manner. Pardon those technical terms, but the bottom line here is that by properly setting up and using the right funding vehicle, you could have completely income tax-free money under federal tax laws.

But this whole discussion is really about state income taxes. That’s even simpler and more amazing. You see, 35 out of the 41 states that levy income taxes use your Federal Adjusted Gross Income (AGI) from line 37 on Form 1040,  line 21 on Form 1040A, or line 4 if you use Form 1040EZ, as the starting point for determining your state tax. I know you are smart, so can already see that since those funds assessed from the nonqualified options described above are not included in your federal AGI, neither will they be included in your state numbers. Therefore, by simply following and exercising your legal duty under our tax laws, you can avoid federal and state income taxes. Boy, oh boy, aren’t simplicity and common sense just elegant?

I’m pretty certain that you have some sort of savings program set aside for your golden years. But have you discussed — in detail — exactly how those funds might be taxed or otherwise affected later on? Of course, we can never predict the future with 100 percent accuracy, but wouldn’t you agree that anything short of a detailed simulation would be irresponsible and potentially catastrophic? It’s time to start discussing it so that you know exactly where you’re headed!

Of course, it’s your decision and your decision alone as to where you ultimately live in your retirement. But wouldn’t you agree with me that that sort of decision shouldn’t be driven by income tax considerations? Especially after a lifetime of hard work? In my opinion, enjoying a comfortable retirement must include absolute control over wherever YOU decide to live. 
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Contact a professional at Laser Financial Group today to set your risk-free, complimentary appointment to discuss ways to preserve your retirement income so that you can live comfortably wherever YOU want to, when the time comes. 301.949.4449 or LaserFG.com.

Dear So-Called Experts, It’s Time to Quit Being Ridiculous

Dear So-Called Experts, It’s Time to Quit Being Ridiculous


On his February 5th radio show, financial expert and guru, Ric Edelman, responded to a query from a man named Robert who called the show to confirm the validity of a claim by Vanguard (which happens to be a direct competitor of Mr. Edelman) that one of their mutual funds has a total annual expense of 0.06 percent. Mr. Edelman’s response was that the claim by Vanguard was “a little disingenuous.”

Mr. Edelman then went on to explain to the listening public that all mutual funds have other hidden costs, averaging about 1.4 percent annually. The guru added, in conclusion, “So in addition to the 0.06 percent, add another 1.4.” Essentially, Mr. Edelman accused Vanguard of lying – after all, who else is more qualified to do so than the star of a radio show called The Truth about Money?

Critical Take-Aways

Of course fees matter – a lot – as I recently indicated. In fact, Ric Edelman brings up an important point regarding the hidden costs associated with most (I didn’t say all) mutual funds.

Now, having said that, Ric Edelman’s characterization was completely bogus, ridiculous, and misleading! Why would I say such a thing? Because the specific mutual fund which he basically discredited does indeed have a total annual expense of 0.06 percent – with no other hidden fees. Mr. Edelman completely dropped the ball (as do several other so-called industry experts) by playing, quite frankly, the irresponsible-generalization game.

As I noted couple Mondays ago, one area where this generalization nonsense must be avoided at all costs is in the arena of personal finance/investing. Shouldn’t financial professionals of any caliber know that two mutual funds, or insurance policies, or annuity contracts, or mortgages, or any other financial products for that matter, are NOT the same – even if they are in the same category or sold by the very same provider – unless they have specific data to back up such a claim?

One can only wonder if Mr. Edelman’s response to Robert’s question has something more sinister to do with the fact that the mutual funds he actively markets to his clients charge much higher fees than the one he discredited without any basis whatsoever? The answer: of course it does.

Personally, I wonder why the first thing on Mr. Edelman’s website (in the largest font size) are the words: The Nation’s #1 Independent Financial Advisor, while the equally critical piece of information about the criterion for that status is – in my opinion – hidden in the footnote section (in the smallest font size)? Is it because that #1 status is based on factors like “contribution to the firm’s profitability,” and “the volume of assets overseen by the advisors and their teams” without any mention of actually having customers who are successfully achieving their financial goals? You’d think it would be all about the client, wouldn’t you? The site also references the radio show on which this incident occurred: “…answers your questions, giving you comprehensive, educational advice that is both entertaining and useful…” You are smart, so you make that call.

The Bottom Line

Whichever financial product(s) you decide to own is/are guaranteed always to come in three forms: terrible, so-so, and great.

Stay as far away as you possibly can from anyone who makes unintelligent statements such as: “Mutual funds are bad/good,” or “So-and-so product is terrible/awesome.” Savvy investors (and true professionals) know that until you have a specific case in front of you, with a side-by-side comparison, you are simply blowing smoke. A truly serious professional would take your specific scenario, analyze it, give you specific, factual, and realistic evidence, supporting or otherwise, about a specific product – not a class of products. Once they do so, you as the investor can make your own decision. You see, the reason some investors are as confused as heck is because of these baseless, emotionally charged, and quite often, untrue and self-serving opinions.

Don’t fall for the hype. Empty barrels usually make the most noise. And the most vocal people are not necessarily right, are they? I must point out, though, that after taking some pounding, Mr. Edelman’s show has since removed his statement that Vanguard was basically lying from its podcast of the show. Looking back at the radio show’s description which I referenced earlier, it doesn’t claim to be unbiased or objective. So maybe we shouldn’t assume that it is.
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Contact us today for a complimentary, unbiased information session about your personal investments and retirement plan. Laser Financial Group or 301.949.4449.

More IRA, Less Tax – Act Now (If You Desire to Be Potentially Clobbered in the Future)

More IRA, Less Tax – Act Now (If You Desire to Be Potentially Clobbered in the Future)


With Tax Day quickly approaching, it’s not out of the ordinary to hear all sorts of “expert” advice on how taxpayers can outsmart the IRS. A great number of tax preparers, CPAs, and other advisors are busy convincing retirement investors that it’s a savvy move to contribute to an IRA, because by so doing they’ll “save” on taxes. In fact, today’s column is motivated by an ongoing major advertising campaign by a national financial institution/bank. Their tag line states: “More IRA, Less Tax, Act Now...”

That might sound pretty catchy, and we know it is an emotional hot button. Or is it, really? As someone who works with real-life retirement investors, half-baked theories like this turn my stomach because all they do is create ticking tax time bombs for unsuspecting investors. Yes, it’s true that by funding an IRA you’ll pay less tax today. But is that the end of the story? Of course, not! It’s just the beginning of potential tax nightmares later on.

You see, these IRAs simply defer (or postpone or delay) the due date for those taxes until you begin withdrawing the funds for your retirement, either out of your own accord or by IRS mandate, once you reach age 70½ . At that point, you must pay taxes on every single dollar you pull out of that IRA. Here’s the kicker, though: At what tax rate? The simple answer: Whatever tax rate is in effect at the time those funds come out.

Proponents of this short-sighted IRA theory might argue that since you’ll be retired – with no mortgage to pay and no children to support – you’ll need only a little income (i.e., very little income) compared to what you need today. It’s therefore only logical that your tax rate also will be much less, thereby beating the IRS at its own game. This is seriously their claim! I think it’s ridiculous, at best – and I really don’t want to digress. But on the issue of “How much retirement income will I need?” let me say this (again, from real-life experience): That line of thinking might hold true, but only for folks who intend to retire with front-row seats to their TV sets. If you intend to have any kind of life, “very little income” just isn’t going to cut it.

Have you ever wondered why the vast majority of retirees who own these IRAs keep complaining, year after year, about being butchered by the IRS? With no mortgage interest deductions (because it’s paid off), no dependent exemptions (because the kids are now responsible adults claiming their own exemptions), and no more IRA contributions (because harvest time has arrived), your three major income-reducing items completely evaporate overnight. As a result, even with a much lower total income, these retirees’ taxable incomes skyrocket. And the really bad news here (or great news, if you’re Uncle Sam) is that taxes are based on taxable income. Pretty interesting how things work, isn’t it?

And, oh, did I mention that every dollar that comes out of these IRAs (whether voluntarily or mandated by IRS rules), directly impacts how much your Social Security checks will be taxed also? Talk about a double whammy!

I know, you thought you were doing the right thing with your IRA, and I don’t blame you, given the advice you likely received – but here’s one more very important variable to consider before jumping on the IRA bandwagon. Remember that the actual amount of tax you end up paying is a function of your taxable income AND your tax rate. It’s no secret that today’s tax rates are a “temporary extension” of “historically low” rates. So, where do you believe rates are headed after the “temporary” period ends (in the face of our humongous national debt, not to mention the astronomical issues facing Medicare, Medicaid, and Social Security)? One way, of course: UP! Is it really a great idea to delay paying taxes today on your seed money, only to pay them in the future on your entire harvest? Think about that!

What's the Alternative?

Wouldn’t it make more sense to go ahead and pay the tax on your seed money at today’s historically low rates? Then tuck it away in accounts that, going forward, you’ll never, ever have to worry about paying any income taxes on again (including all your gains)? And you’ll be in absolute control (without the IRS telling you when you may or may not touch those funds)? And regardless of how much you withdraw, it will not impact taxation of your Social Security checks in any manner? And when, at death, you pass the remainder on to your beneficiaries, they will receive the inheritance completely income-tax free, also? Wouldn’t most Americans consider that a smarter, better approach?

At this point, you may be starting to understand why I said this IRA theory makes my stomach turn. If you don’t quite get it yet, that’s okay – but please print and keep a copy of this column somewhere, because sooner or later, you’ll understand. The thing is, the alternatives I just generally described are available in the exact same tax code that others have read, only to come up with the not-so-smart idea of IRAs.
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Please contact a representative at Laser Financial Group today to schedule your complimentary consultation about how to realistically preserve the most funds for your retirement, without having to pay a higher tax rate “later on.” 310.949.4449 or LaserFG.com.

Why G.E. Made Billions, Yet Paid NOTHING to the IRS (and How You Can, Too)

Why G.E. Made Billions, Yet Paid NOTHING to the IRS (and How You Can, Too)


One of the huge stories of late has to do with the fact that General Electric (G.E.), America’s largest corporation, paid nothing – as in zip, nada, nil – in taxes to the IRS, in spite of raking in $14.2 billion (with a “B”) in profits last year. What’s more, according to The New York Times, G.E. claimed $3.2 billion (again with a “B”) in tax benefits. 

Bet you’re wondering, “What in the world is going on here?” This news story sounds great as a sound bite because of the emotional twists associated with it.

First and foremost G.E.’s CEO, Jeffrey R. Immelt, is the Chairman of President Obama’s Council on Jobs and Competiveness. And as if that were not enough, from the look of things, they seem to be very close buddies.

Secondly, companies and individuals who made much, much, much less money last year mailed tax checks up the wazoo to the IRS.

Inasmuch as this may seem unfair (or whatever other adjective you choose to apply), the reality is that, as far as we know, G.E. hasn’t done anything illegal! The completely-legal-nothing-wrong situation here is that G.E.’s profits/income/revenue are NOT taxable under American tax laws. I think this statement by John Krenicki, one of G.E.’s Vice Presidents, sums it up pretty well: “We pay what we owe.” The thing is, they owe nothing by law, and I’m not aware of anyone or any corporation who’d pay taxes they didn’t have to.

All that aside, what everyone needs to fully understand – and I mean fully – is that when it comes to taxes in America, “total income” (or the amount of money one makes), is irrelevant, so to speak. Instead, the magic number is “taxable income” (or the portion of that total income that is considered taxable). If you haven’t already done so, you’ve got to read Mistake #1 in my book, 5 Mistakes Your Financial Advisor Is Making – which, by the way, is available to you as a free resource. 

I’ve said this several times in the past, but it’s worth noting again: just because someone makes more money than you do doesn’t imply that they’ll pay more taxes than you. Over the years, I’ve witnessed so many folks – including some so-called financial experts – make the rather sad and completely avoidable mistake of thinking that paying taxes is and/or has to be logical. News flash: it’s not! And GET THIS, once and for all: tax obligation depends on which portion of one’s income is considered taxable (or non-taxable) under IRS rules, period!

Here’s a Suggestion for YOU!

Why don’t you structure your affairs so that your retirement income is deemed non-taxable by the IRS to the largest extent possible, instead of simply employing the traditional 401(k)s, 403(b)s, and IRAs which just defer/delay/postpone your taxes? That way, regardless of how large or small your income may be, your tax bill would legally be zero – just like G.E., in this instance.

Then, you can decide to donate whatever YOU wish to the IRS – they’ll never turn that down, I guarantee it! Or you might decide not to do that, and there will be nothing illegal, unethical, or even unpatriotic about it. That’s what we help our clients achieve (minus the donation part). We let them decide that on their own.

A Judge named Learned Hand (1872-1961) served more than 50 years on the federal bench, many of those years as the Chief Judge of the U.S. Court of Appeals, Second Circuit. He wrote something I would like you to consider very carefully:

“There are two systems of taxation in our country: one for the informed and one for the uninformed.”

Are you informed – or dealing with financial professionals who are informed? If not, isn’t it time you start?
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For your complimentary session to explore your options regarding a tax-free life and/or retirement income, please contact Laser Financial Group today at 301.949.4449 or visit us on the Web at laserfg.com.

What Is the Most Lethal Force Against Your Retirement?

What Is the Most Lethal Force Against Your Retirement?


As a managing principal of a financial firm who constantly interacts with retirement investors from across the nation, I can confirm without a shadow of a doubt that the majority of Americans approach their personal finances with broad generalizations. You can confirm this by taking a sampling of any number of folks, asking them which investment product(s) they believe is/are best for achieving their retirement income needs. Nine out of ten – if not all of them – will give you the exact same responses. And when you ask the follow-up question regarding how they arrived at their conclusions, you’ll almost certainly hear another similar response: “Isn’t that what everybody else owns (or is doing)?”

The rather sad mistake with this troubling phenomenon is that it lumps all retirement investors together. Common sense, on the other hand, tells us that in matters such as this, no two individuals are ever the same, even identical twins.

I must say, however, that I don’t fault the average investor at all, because it’s not their fault. I squarely blame the financial press and certain so-called experts who have – either knowingly or unknowingly – created the completely bogus illusion that it is appropriate to lump all investors together as one single unit. This would be akin to a doctor assuming that every patient needs the same medicine, which you’d have to admit would be totally ridiculous, unprofessional, and quite frankly, dumb. As basic as it may sound, the fact is that something that would work beautifully for John could leave Mary’s life in ruins – and that applies to the field of personal finance, too!

What makes this generalization nonsense even worse is that the average investor usually doesn’t digest the advice thoroughly because it sounds perfectly fluent and logical – yet beneath the surface, these theories are almost always half-baked and never present the complete picture.

A recent case in point occurred when a man was willing to bet the ranch on the advice that “all annuities are taxed on their gains.” You might even agree with that statement. Here’s the problem: that statement is based on the broad generalizations you are likely to see in the financial media, read in certain financial books, hear on radio shows, or watch your favorite TV financial guru spout off. The fact is, that’s not the complete picture and hence not entirely accurate! Unbelievable, isn’t it?

“All annuities are taxed on their gains” is true only for “qualified” and “non-qualified tax-deferred” annuities. Do any of these experts know that there’s a third category of annuities known as “non-qualified, income-tax-free?” Yes, those are annuities, too! And they are completely income-tax free! My point is that generalizations always omit certain critical details that could make you or break you – or any other investor, for that matter.

On an almost daily basis, I hear and/or read supposedly powerful financial information that makes me agree, more and more, with the legendary Will Rogers’ statement: “The problem in America isn’t so much what people don’t know; the problem is what people think they know that just ain’t so.”

I often wonder how many folks out there are making critical retirement choices based on what they think they know that isn’t actually the complete picture. Wouldn’t you agree that everyone needs all the pieces of the puzzle in front of them from day one? Please, do your future financial comfort a huge favor and stop seeking generalizations. After all, you are unique, aren’t you?
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Contact a strategist at Laser Financial Group for a complimentary consultation so that you can learn about personalized financial options that are tailor-made for your situation. 301.949.4449

The Only Sure Way to End Your Retirement Financial Woes

The Only Sure Way to End Your Retirement Financial Woes


One study after another reveals that a large majority of Americans face serious predicaments in their abilities to sustain themselves financially during retirement: from those who are beyond the usual retirement age and cannot retire although they want to, to those who have to come out of retirement to start working again, just so they can get by, to those who are a few to several years away, but know that with things the way they are, they are headed in the wrong direction, to those who are OK in retirement today but know that they might run out of money sooner or later.

If you belong in any of these categories or have just about any financial worries regarding your retirement, today is your lucky day, because I’ve got the one and only solution you need – no kidding! Before I proceed, though, let me caution you that as always, I am going to be candid, so you need to buckle up!

You see the thing is, you – or anyone who’s not satisfied or sees some form of a threat in their retirement plan – face the same common problem: your existing setup is flawed! That’s genius, right? If the plan were good, you wouldn’t have been concerned to begin with. Therefore, the solution to every retirement financial woe can be found in this quote attributed to Albert Einstein: “Insanity is doing the same thing over and over again and expecting different results.” Stated in my own words, your only solution is CHANGE!!! Genius again!

Your only shot at fixing your situation is to look for a better alternative that is legal, realistic, makes sense, and is proven to have worked. Note here that I’m not saying that the better alternative should be something you already know about. In real life, chances are good that you wouldn’t know about it, because if you did and you are still in this current situation, that would be saying a whole other thing about you, wouldn’t it? I know you are smarter than this, but there are folks who are dissatisfied (and keep wailing every day) about their present retirement picture, but who at the same time are unwilling (or at least act that way) to do anything different. And they wouldn’t even take a closer look at something they don’t already know about. I wish every retirement investor would memorize Marshall Thurber’s statement that while different isn’t always better, better on the other hand is always different!

Being dissatisfied, scared, perplexed, unhappy, and complaining about something is a complete waste of precious time and energy if you don’t take action to change your desired outcome. Stop complaining and start changing! And oh, about the genius thing, Josh Billings said “Genius ain’t anything more than elegant commonsense.”
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Call us today at 301.949.4449 or visit us on the Web to schedule your appointment to talk about making financial changes that can affect your entire future - POSITIVELY!

Why Bother with Tax Loopholes When the Same Code Has Legitimate Tax-Free Options?

Why Bother with Tax Loopholes When the Same Code Has Legitimate Tax-Free Options?


A couple Mondays ago, the IRS announced what it calls the 2011 Offshore Voluntary Disclosure Initiative (OVDI).  According to Commissioner Doug Shulman, this program, which runs from February 8 through August 31 of 2011, is the “last and best chance” for people who are hiding money in undisclosed offshore accounts to “get back into the U.S. tax system.”

The IRS is basically offering these individuals a deal whereby they come forward now, pay all the back taxes owing, an additional 25 percent penalty of the amount hidden, and interest for up to eight years, as well as, paying accuracy-related and/or delinquency penalties. In exchange, they will avoid criminal prosecutions for the illegal activity of hiding money in offshore accounts. Back in 2009, the IRS launched something almost identical, and according to what they tell us, about 15,000 individuals came clean at that time. However, according to the IRS, there are still a lot more folks hiding money, and this is the very last chance for them to even out, or else…

The only reason I can think of as to why people would hide money in offshore accounts is so that they can have the income on those investments, tax free. We all know that tax free is awesome, but it always amazes me to see the extent to which people are willing to go just so they will not pay the taxes they must pay. We’re not necessarily talking ultra-wealthy people here, because some of the folks who came forward back in 2009 had as little as $10,000 invested. Don’t we all hear about these offshore deals from time to time?

Here’s what really makes me wonder, and wonder again. Why in the world would people resort to loopholes, knowing very well (or should I say, they should have known?) that they are illegal, and could be closed any day? And on top of that, why would they risk jail time when, in fact, they don’t have to do so to achieve the SAME results???

Here’s the thing. Under those same tax laws, individuals can put away basically unlimited sums of nonqualified money, let it grow, and later access everything (including all the gains) without creating what the IRS calls a “taxable event,” thereby making it absolutely and completely free of any income taxes. We have clients who have been doing this for years! Seeing reports like these only strengthens my conviction that indeed a lot of people simply don’t know what they don’t know.

Not even one of Laser Financial Group’s valuable clients had ever had an IRS issue as a result of a strategy or advice they obtained from us, and I’m 100 percent certain that nothing like that will ever happen in the future! How can I be so sure? I know this for a fact because everything we do is based on existing tax laws, our clients are never at risk. We run as far away as we can from loopholes, and you should, too!
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Call us today at 301.949.4449 or visit us on the Web to schedule your risk-free complimentary session to discuss the ways you can legally shield yourself from paying unnecessary taxes!