The Prosperity Gap Podcast

We're going to be talking about risks that face your retirement, I'm going to focus primarily on eight main risks.
1- Social Security Risk
2- Lack of Income Diversity Risk
3- Tax Rate Risk
4- Longevity Risk
5- Sequence of Return Risk
6- Withdrawal Rate Risk
7- Long Term Care Risk
8- Inflation Risk
So how do we solve all these risks? This is a huge laundry list of risks that are facing your retirement. Well, how do you solve These, it's by putting together a well organized plan and focusing more on getting through retirement rather than focusing on getting to retirement.
What could possibly happen to cause taxes to go up?
Here are three main things.
1- social security is one of the big ones, 2- Medicare even bigger than Social Security, and it's turning out that 3- the national debt may become bigger than any of these.

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We are talking about the two main risks of Social Security today. #1 is the risk of taking your social security too early and #2 is that your social security will be taxable.
In fact today we're going to focus on the second risk that faces you regarding your Social Security and that is that your social security will be taxable.
Now, when it comes to talking about Social Security tax, this is an area that many people often say why it's one of those taxes very much like an estate tax. Why do we have to pay taxes on an estate? When we paid taxes on all the income that we earned during our lifetime that created this estate? Or maybe why do I have to pay taxes on a used vehicle that I purchased when the taxes were paid when the vehicle was sold brand new to the first person who purchased the car? When we talk about social security taxation, it brings about a lot of ways people do not understand why taxes would be applied. But hopefully as we go through the podcast today, maybe you can get a better understanding of why this is the case.

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The tax deferred bucket is an interesting bucket because this is where 95% of America's retirement assets are being held. There are over $22 trillion held inside of some type of tax deferred account. When you compare that to the tax free bucket or assets that are being put into Roth IRAs, or Roth conversions or Roth 401 K's there is only about 1 trillion dollars that's being put in these tax free bucket. So it's a bucket that's been filled for a long time.
Now, why are these accounts getting funded so much? Well, a couple of reasons. One, because the government's pushing us to put money into these realizing that there is an asset that's being built inside of the governmental system for them to take advantage of at some future date. But also because many of our advisors that we've met with have encouraged us to make these contributions. If you sat down with the majority of CPAs, EAS or even professional Financial Advisors, they're going to tell you that you need to continue to find this tax deferred bucket. And why do they tell you that? Because you're getting a current deduction, and it's making them look good.

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Now, in today's show, I will be talking about the taxable bucket. If you joined me on my podcast from last week, you may remember me talking about how there are millions of different investment options you can choose the fund your retirement, and that the planning process is a simple three bucket system. These three buckets are the taxable bucket, the tax deferred bucket and that magical bucket that I call the tax free bucket. Of the three available buckets the one you're probably most familiar with is the taxable Bucket. Why? Because this is the main bucket most of us have used during our lifetime. The bucket work something like this.

A new month rolls around and some type of income is deposited into the bucket, and it starts to fill up. Then the minute the money clears the bank we start taking the money out to cover monthly living expenses, and the pocket starts to go down. Now if you're lucky. When you get to the end of the month, you'll have some money left in your bucket. The money left should then be used to help make sure your taxable bucket maintains a safe level of assets, which is six months of income. Or the money should be used to invest in your tax free bucket. But unfortunately, this is not what usually happens. All too often, people decide to do one of the following with the money.

The first group. They decide to completely empty the bucket. The second group, they decided to keep growing the bucket way beyond the amount it should contain. And the third group. They take the money out and invested in the tax deferred pocket, believing they're doing the right thing for their retirement. But unfortunately, all three of these actions can create major problems with your retirement. Let me start by talking about the first group who choose to empty the bucket. All we have to do is look around us and we realize emptying are taxable bucket zero is not a good idea. In life there are way too many economic ups and downs, and we need to make sure we have a reserve to cover ourselves when these times happen....

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Julie, a personal finance master coach from The Money Wisdom Coach joined the podcast to share the steps on how to handle your finances to achieve prosperity and complete financial peace. As a finance coach he job is to empower people to take control of their lives and financial dreams. Learn how to get started and how to stay on course to a debt free life.

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