There is never a wrong time. I don't care what this guy says.
I don't care what his tax computation says. There is never a wrong time
to fund a Roth. Welcome to another episode of The Chicks on the Right
Show with our good friend and sponsor of the show, Zach Abraham, who
is chief investment officer at Bulwark Capital Management. And we turn to Zach when
we have questions and we just want to vent about the state of the economy
and finance and money in the United States of America. That's when we count
on our friend, Zach. Zach, thank you once again for joining us.
Oh thanks for having me. I love it. We have a couple
of different issues that we want to tackle with you today. The first which
we were not expecting, But there is a story that we saw a headline
that kind of grabbed our attention that said, is a ROTH four to one
K really a good IDEA personal finance guru claims he lost four hundred grand to
a popular retirement scheme. That's how they're referring to a ROTH four oh one
K, and he warns others against this costly mistake. Yeah, so,
first of all, he didn't lose four hundred thousand dollars. So what now?
I didn't read through the whole thing, but I looked at the bullet
points that what he's talking about is he's talking about the lack of a write
off. He's getting or right because with the traditional IRA, when we put
money into traditional IRA, we write that amount off up to seven thousand dollars
a year. Right, So when you put money into a roth IRA,
you don't get a rite off. It's post tax money, right, but
one hundred percent of the profits in that account. So let's say you put
one hundred thousand dollars into a ROTH account and it grew to ten million.
Okay, if you wait till retirement. Ame, how do we make that
happen? First? Right? How does that happen? It's the guarantee?
Right? Trouble saying this? Right? What twenty percent annualized returns every year,
no matter what? Right? In all seriousness, if you think you
found an investment like that, you found a fraud. So don't you don't
listen to me. I'm joking. Okay, so but but yeah, none
of that money. Funny funny story about that, none of that money is
taxable to the tune where Peter Teal, one of the co founders of PayPal,
took his original right when they started the company, took his stock and
PayPal and put it into his roth. IRA. Well, that stock is
now worth five billion dollars, completely non taxable. Right, So there is
never a wrong time. I don't care what this guy says, I don't
care what his tax computation says. There is never a wrong time to fund
a wroth. And for small business owners, I've got a little secret for
you out here, a little trick that we use, and it's completely legal
that I'm not going to be on national or on your Guys show advocating somebody
to do something untoward or questionable. But if you are a business owner or
a contract employee, right so technically self employed or you know, a contractor,
you can hire your children to do work for you and you can determine
maybe that's, you know, taking out garbages at your house, maybe that's
cleaning your office, whatever the case may be, and you can pay them
up to eleven thousand dollars a year and that is not reportable income, right,
so you can write it off, but they don't have to pay taxes
on it. But because it's earned income, they can contribute to a ROTH
ira with the money that you pay them. This is fantastic. I love
this so much. It is the only way to get non taxed money into
a ROTH account, and so I've actually set those up for our kids in
lieu of college savings accounts because something else people don't know about a ROTH is
you can use ROTH. You can use the funds and profits inside of a
ROTH account just like you would a college satan's account. You can also use
it for first home purchases. Right. So bottom line is this, if
you start a kid contributing to a ROTH at any age before twenty one and
they stick to it, they're going to end up with a giant pile at
tax free money. So I think that's just awesome. Yeah, that is
awesome. What I hate about this article is that people are looking at that
and they're like, I'm just not going to invest, and yeah, don't
don't do that now. Now, what he might be talking about is like
a so in a lot of these new four one K plans, they have
like a ROTH sleeve. So you've got the traditional four one K set up,
which works exactly like in a traditional RA and then you can also fund
the roth side. Okay. Now, the one caveat I would say is
do not fund the roth side until you have maxed out your match on the
traditional side, right, So number one thing I tell people all the time,
if your employer offers a match and you're not maxing it out, you
are burning money. Take the money, right and then any additional funding you're
going to do outside of that funnel that into the Roth side of things.
Okay, interesting, it's good. I hope a lot of people are listening
to this because I know that that's gonna shift some thinking about people's personal finances
for sure. And I don't know if you guys feel like this, but
look, as long as we're as long as we're operating inside the rules or
we're not breaking any rules. Um, when you cannot pay the irs right,
right, it just feels like Christmas, doesn't it? Like yea,
even your money, it's your money to begin with r right. But when
we when my CPA showed me this whole wrath thing, I just like I
came home just rubbing my hands together, going baby, never, you'll never
guess you know, it's fantastic. Yeah, it makes me excited. I
don't want to be Captain bringdown on that note, because that was a very
that's like a super positive. But what's also in the news as of late
is Biden and his Bidenomics. So and the White House is so excited about
this, like they are pushing it. They want everybody to believe that things
are great thanks to them. Yeah. So what was your reaction when you
first heard the term and its rollout? Um? Yeah, I give us
your honest opinions act. You can say all the things on our show.
You can say, I mean, the whole the whole idea is complete nonsense.
The guy does not have a coherent economic plan. I don't think anybody
with any basic level of economic understanding would argue against that. Um, it's
been one, you know, one nonsensical stream of nothing for since the guy's
taken off. Did you think the name Did you think the name was clever?
I mean it was really clever, Rightenomics? Well yeah, super clever.
Yeah. I mean, but you know, like when the entire mass
media is effectively your campaign, arm I mean, you've got a pretty big
universe to pull from, right, somebody's going to come up with something clever
because they're all pulling in your direction anyway. I mean it sounds like Reaganomics
a little bit, right, right, except you know, like his whole
I mean, his whole economic plan is to run bigger deficits. So I
mean that, you know, that's it, Like, that's that's end of
the ball game. And I think that I think that a lot of people
are really confused. If you look at some of the nominal data coming out
on the economy, it actually looks okay. For instance, they revise Q
one GDP higher, and so people are talking, oh, bigonomics is working.
That what we see happening To give you guys a little piece of data,
and why we're saying this is if you look at if you track credit
card and debit cards cards spending over the course of the year. In the
in the first quarter credit card and debit cards spending, we're up ten percent,
you're over a year, okay. In the second quarter of this year
it's negative two percent. Okay. So it's like everything else you're and it
really makes sense because when you injected as much stimulus into the economy as we
did, and and you funneled it directly to consumers, right, well,
what it does is it creates excess savings, and consumers are very habitual creatures,
right. It's it's we all have more in common as consumers than we
think we do. And what ends up happening in a scenario like that is
excess savings will fund increased consumer spending for a while. Then inflation jumps up
makes everything more expensive, right, which we've all seen, and then excess
savings begins to get tapped and you see things returning, you know, back
to the back to the previous arc, you know, so like before the
stimulus started. And I think that that is the biggest confusion right now.
People are looking and saying, oh, it's economic strength, and you're sitting
there going no, no to us. It's a wily coyote moment. Meaning
you're looking at the apex effect of all of that stimulus and it is wearing
off and you can see it in all the data and I'm talking restaurant data,
and it's just amazing. We live in a in a tunnel right now
where you know, I call it like the post truth world where everybody wants
to talk about something called bigenomics and talk about how everything's going great. You're
just on the back end of a sugar high is all it really is,
Okay, and you come down from it. I mean, there's no way,
there's no way the economy can sustain operating at the same fever pitch it
did when people were getting five thousand dollar checks in the mail. You know
what I mean, Like you jack up rates, people go back to work,
and you take away the stimulus, and they're expecting the market to continue
operating, in the economy to continue operating it, and the consumer to continue
operating like they did in twenty twenty one. And you're just looking at it,
going, I ain't gonna happen, guys. So when Joe Biden keeps
saying this whole nonsense about how if you make less than four hundred thousand dollars,
you're not going to pay a penny more in taxes, where everybody is
paying more for everything. So if it's not federal income tax, it's the
cost of milk, you know what I mean, Like that is effectively at
tax. Yeah, oh, it absolutely is. An economics, we refer
to inflation as the silent tax, right, the invisible tax, because it
not only is it at tax, but it's the most onerous And this is
what drives you nuts if we really am. And I could go off on
hours on this, but then if you start looking into energy policy, right,
we want to strategically make petroleum types of energy, right, oils and
gas and things like that, we want to make them more expensive to incentivize
the turn to green. Well, you look at them and go, okay,
when the price of gas goes up a buck fifty a gallon, it
doesn't upset my lifestyle, it doesn't upset yours. Who's does it upset?
It upsets the working people, right, the people making sixty to eighty thousand
dollars a year. And when you sit there and look at these, the
fiscal ear responsibility. And it's not just democrats, right. It's one of
the funny things that really ticks me off about the right too, is that
there seems to be this habit of we only care about debt and deficits when
there's a Democrat in the White House. Right. So I'm not trying to
get too partisan with it, but you just look at it and go,
you know, inflation is the number one killer to the average consumer, right,
It's worse than marginal tax rate. Here there you know, they're not
rich enough to be able to manipulate the tax code, which is what a
lot of rich people in this country do. But no, it's it's all
nonsense. And whatever benefit they's claimed to be giving them, I mean you
see it all over the place. I mean, go go and read General
Mills, Great, General Mills, Cereal, you go look at them.
People are consumers are being forced to downgrade. Costco came out recently and said
we're seeing consumers switch from beef to canned chicken. Right. It's it's the
little guy that's going to take this the hardest and is taking it the hardest
right now as always, and unfortunately the media and the environment Wren tries to
pitch these people as the patron saint of the little working night and it's just
it's it could not be further from the truth. So then when you say
we're on a sugar high, like it's with every sugar high, there's a
crash, like theyre going to be like an even bigger crash, especially for
those people that are eaten canned chicken. Yeah, so that's kind of the
crazy thing where I'll just tell you we've never seen a more bifurcated market outlook,
where you've got the stock market telling you one thing, and literally every
piece of leading economic data we can get our hands on. It's very consistent,
and it really makes sense if you track all the data. You're kind
of clipping along at this normal run leading into twenty twenty, right, and
then all of a sudden, all the stimulus hits, all that stuff hits,
and you just see an explosion and consumer spending, debt, issuance,
credit issue, all these different things. Right, And so once that stimulus
is pulled away and interest rates are jacked up, I don't think it's crazy
to assume that things will return to the arc they were on previously before all
that artificial stimulus was injected. Right, Well, what the market is saying,
and what Wall Street is saying, is no, we have a new
normal, and this becomes the baseline that we build from. And you're looking
at it and going, you guys are insane, Right, Yeah, you
can't jack rates this high, remove all that stimulus and expect the consumer to
continue spending the same way. It's just not possible. Yeah. So yeah,
to us, I think that you're seeing I think we're on the front
edge the tip of the spear of that quote unquote crash. Now, to
be fair, it's not going to be a situation like O eight to nine.
I don't think, because you know, we've been telling our clients this.
Yeah, I think we're in for a rough ride. I think the
investors are being way too optimistic regarding earnings, outlooks and things like this stock
valuations. That being said, I don't think we're on the edge of a
black hole because as soon as the pain starts, ready yourself, the Federal
Reserve will begin printing money again. And if the Biden administration is in office,
which we think they will be when this starts, we think it's probably
starting right now. Actually, um, they're gonna flood. You know,
they're gonna throw money at it. That's what we do now, which is
the oh my god, yeah, okay, well shoot, because I was
here here, I was like, I don't want to be captain bringdown because
we were on such a high when you were telling us about the four one
K the Roth stuff, And I have a I have a feeling that when
people listen to this, they're going to be like, how do I get
ahold of that? Zach guy? Because I want to know more. So
tell them how they can get a hold of you. Yeah, they what
that ten million dollars? Yeah, guarantee right, guarantee. Yeah, I'm
sure regulators will love to hear that I'm guaranteeing annualize the journey. M So,
first of all, you can we do our own show on podcasts and
you can just google Know your Risk Radio podcast asked or find us on Spotify
or iTunes or anything like that. You can google our board Capital Management dot
com that takes you directly to our site again, Know your Risk Radio.
You can follow me on Twitter at KYR Radio pretty easy to find. There's
a lot of different interviews and things we've done on YouTube and you can track
us down pretty easily. Awesome. Well, it's been great as always and
we will look forward to talking to you again in a few weeks. Hopefully
there will be good news to discuss, but we never know what the Biden
administration. Get hold my breath. Thanks. We appreciate Investment advisory services offered
through Trek Financial LLC, n SEC registered investment advisor information presentatives for educational purposes
only. It should not be considered specific investment advice. Does not taken to
consideration your specific situation, and does not intend to make an offer or solicitation
for the sail or purchase of any securities or investment strategies. Investments involved risk
and are not guaranteed, and past performance is no guarantee of future results.
For specific tax advice on strategy, consoled with a qualified tax professional before implementing
any strategy discussed herein