Speaker 1: Welcome to another episode of the Chicks on the Right
podcast where we talked to our friend and sponsor of
the show, Zach Abraham from Bulwark Capital Management. And today
we have a question about finances and kiddos, because there
are lots of people out there who have questions about
when and if they should start saving or investing for
their kids. Now, granted, that's not something everybody can do,
and I would think that the right thing to do
is the mask and the airplane, right, Like, you make
sure your own needs are taken care of, your own
retirements taken care of before you even think about helping
out the kiddos. But is that right or should everybody
be maybe investing a little bit in their kids, whether
it's education or whether it's retirement for their kids.
Speaker 2: Well, so it's funny we were talking offline.
Speaker 3: I was actually engaged in a conversation about this today.
I was responding to a tweet where another financial guy
CPA know any manager type put out a guideline a
thread on how to build your child's UH trust fund? Right, so,
how to accumulate enough money to where your kid doesn't
need to work or something like that. Yeah, And well,
my first response is was, like, guys, the only person
out there that would want to create a trust fund
for their child is somebody that has never been around
people that were trust fund based.
Speaker 2: Not how they're not happy. Suicide rates are.
Speaker 3: Yeah, addiction rates are higher, Divorce rates are like double
or triples. It's not good, right, Like everybody should know that.
So now, but what I am going to do. There's
a there's a there's a hack out there that I
that I want to I'm gonna give to everybody free
of charge. It's one of my favorites. But but it's
for and I'll get to it just after this. But
should you be saving for college if you can? Absolutely?
The other thing too, is is you know, I think
that you should be having conversations about what you expect
as far as college goes, like.
Speaker 2: What are we saving for? You know?
Speaker 3: I think that there is incredible ways to do college,
unlike so many people are doing it today, where you
can get an excellent degree and not go massively into debt.
Community college is one of those things. Yeah, I don't
want to go to union college. Okay, Well, you don't
want to be a quarter of a million in debt.
I can tell you that, right, But yeah, should you know,
so should you start saving for those kinds of things? Yeah,
if you can. But you said it perfectly, which is
should you right? Well, should you if you are taken
care of first, right, Like you're you're not working so
your kids don't have to work someday. Right, We're working
so your kids don't have to pay for you someday.
Speaker 2: Right.
Speaker 3: So that's the break you're going to give the kids.
But as far as saving for the kids goes, this
is something that people can take advantage of. You need
to tack talk to your your own tax person, okay,
But it's much easier to take advantage of this if
you own a business.
Speaker 2: But it's not the only.
Speaker 3: Way to take advantage of this. So one of the
great my favorite thing for my kids planning. So I'm
a guy that mans money for a living. The only
accounts I have opened for my kids are individual brokerage
accounts where they're involved with me. We'll pick out some
stocks things like that, and then they're wroth iras.
Speaker 2: Okay.
Speaker 3: And why do I say wroth Because for me, the
wroth is the best education funding tool for me and
my family in my situation.
Speaker 2: What is the drawback to a wrath.
Speaker 3: If you go into some of these five twenty nine
probably called savings accounts that are designed for that you
can have higher contributions per year, the wroth is going
to limit you do I believe seven thousand year, Okay,
so you can get up to I think twenty five
thousand and some of these other colled savings accounts, but
some serious drawbacks. So a most of these college savings
accounts will require you to spend the money down at
some point in the not too distant future. The money
can be applied only to education purposes, and I think
they I think you can use it to first first
time home purchases as well. But if you don't use it,
you're going to have to take it and pay taxes
on it. It's it's one of those deals, right. The
other thing I don't like about those accounts is they
have predetermined allocations, meaning they tell you what you can
invest in. Okay, So for somebody that manages money, obviously
that makes them unattractive to me. I would much rather
and I am very confident that we will generate significantly
better results than the prepackaged portfolio they put inside them.
And one of the reasons I say that is because
all of those prepackaged portfolios come with a secure part
like bonds in them. Okay, so if you flip over
to a WROTH account, you can put in less, but
a WROTH account gives you all of this. You can
use wrath money without penalty, without taxes or college. You
can use WROTH money for first time home purchases. But
here's the difference. You don't have to run it down,
and you guys can play with the numbers yourself. Look
at Now, maybe you can't do this much, but just
go look at seven thousand a year over the course.
Speaker 2: Of your child's life.
Speaker 3: Okay, up, and let's say they continue putting that money
into the wrath. And if you run that putting in
seven thousand dollars a year and assume a ten percent
interest game right, just less than the stock market is paid.
The amount of money that you will generate that kid
that is tax free, is going to be incredible. And
that money can be used for education, can be used
for a first time home purchase, but doesn't have to
be Now here's the catch.
Speaker 2: Here's where it gets really interesting.
Speaker 3: The bummer about a wroth is you don't get a
tax right off.
Speaker 2: Okay, but there is a right because you.
Speaker 1: Use there is a putting it in after taxes.
Speaker 3: Yeah, yes, it has to be off earned income. But
here's a little catch. Now again, run this by your
tax person. What I can promise you is I've gone
over with my tax people. This is one hundred percent legal.
I don't mess with the irs. Okay, but still even
though just it's it's bad business, right, but it's it's
like messing with the sec. You just don't want any
of that, right, But this is completely legal, and you
got to deal with your own tax person. But there
is a way to get the deduction and the WROTH okay,
which is really sweet because and this is the only
legal way I know how to do this where you
can get a tax deduction, putting the money, the WROTH
money into your kids accounts and the money will forever
be tax free. And remember with the WROTH here's the
other reason why I like ROTH. If you need to
pull the money out, you can always pull out your
principle penalty free.
Speaker 2: So this is why it's great for small business owners. Right.
Speaker 3: And if I'm doing good, I can contribute to the
kids WROTH and all that kind of stuff.
Speaker 2: But if I run into a tough.
Speaker 3: Year, I like, I don't want to raid the kids accounts,
but if I have to, I put it in there, right, like,
if I keep the business opening money, and I can
pull the principle out without any penalties. But here's how
you can do it. So, especially if you own your
own business, you can hire your children to work part
time at your business.
Speaker 2: And that is whatever.
Speaker 3: Maybe that's them sweeping the fact, maybe that's them sweeping
out the garage of the business. Maybe that's them working
in my office space. Whatever that is. As long as
they do not make more than ten thousand dollars in
the year, they don't have to pay income tax. Okay,
ten thousand or below, you don't owny income tax, okay.
But I'm hiring them to work at my business, so
I get a deduct the money I'm paying them off
my taxes, right, and they get the earned income And
so then out of that ninety five hundred dollars or
whatever they made that year, because it's earned income, they
can make a seven thousand.
Speaker 2: Dollars off contribution. So now you are.
Speaker 3: Building roths in the accounts that can be used that
you can pull the money out penalty free if you
need to. The kids can use for education, just like
a college savings plan. The kids can use for a
first time home purchase. But if they don't need either
one of those, then there's no time limit. They can
let that wrath roll on until they're retired, and then
they're sitting on a big pile of non tax money.
Speaker 4: So why didn't I know about this ten years ago?
Speaker 3: It's look, I don't know why more people don't talk
about this, but this is a beautiful funding mechanism. The
other thing I like about it right now is so
many of us kind of feel up in the.
Speaker 2: Air about college. Right the whole era around or the
aura around.
Speaker 3: College has shifted, and way more parents are looking at
community college, way more parents are sitting there going I'm
hearing more and more kids talking about going to trade schools,
which I think is wonderful. So this is a way
where we can contribute and save for college without being
law walked into college and not have to have some
onerous tax situation if the kid chooses not to go, right,
But that that, to me is something everybody should do.
If they can do something like that, pay the kids
for what they do.
Speaker 2: Right.
Speaker 3: I know of a client that did it with just
his kids working around the house. Right, he just just
like he can ride off.
Speaker 2: I believe you can.
Speaker 3: Yeah, yeah, you can write off a handyman work around
the house, I believe.
Speaker 1: Right.
Speaker 3: So yeah, so it's hiring an employee, so you can
do it that way.
Speaker 4: It's beautiful, It's brilliant. I love this. I'm just mad
that I didn't know about it earlier because and this
is the kind of stuff that you just you don't
hear about because you hear about some of these like uh,
you know, like Texas has the Texas Tuition fun and
we pay into that. But you're you're absolutely right, because
what if my daughter decides she wants to go out
of state, Well we're going to get things, you know, Yeah,
we're going to get so you think you're doing the
right thing. But like during it, I wish I would
have known about it.
Speaker 1: You know. That's because like nobody knows what they don't know,
and so you can you can have a tax person,
you can have an accountant, but like if you don't
know the questions to ask, then you don't know this stuff, right.
Speaker 3: Yeah, yeah, And then also right, like if you walk
in somewhere and they're like, oh, yeah, here's a five
twenty nine, this is the college savings plan, So naturally
that's what you should do.
Speaker 2: Right, Well, if you look at it, most people.
Speaker 3: That are funding one of those aren't funding it by
seven thousand years, right, They're not reaching The only reason
to do it is if you're really confident your kid's
going to go to school and you need to be
putting away the maximum amount and getting that deduction.
Speaker 2: Otherwise do the WROTH.
Speaker 4: What I'd loved about what you said before about including
your kids and making some of the decisions about the
WROTH is basically giving them a financial education that they
wouldn't have had otherwise, which I think is so invaluable
because so many kids have no idea about any of
that kind of stuff. They don't learn it in school,
and so that's something that you're also teaching them that
they're going to be able to take that and carry
what So if they don't go to college, or if
they do or whatever, they're still going to have that
financial education that you've given them.
Speaker 2: Yeah, and.
Speaker 3: There's so many parts to financial literacy too, Like one
of the things you gotta like I would challenge everybody
out there.
Speaker 2: And this is kind of a personal belief of mine.
Speaker 3: If it doesn't correspond with yours, that's fine, But I
feel pretty adamant about it. In this day and age,
you know the old adage, we don't discuss religion and politics, right,
or we don't discuss money in whatever. I think those
three things should be discussed at every dinner table every night, right, Money, religion,
and politics, because that's what matters, okay, And money is
a very important part of that. And when your kids,
for a variety of reasons, right A, understand value, b
understand what work it's going to take to duplicate the
life that they grew up in, right see, help them
understand also that money does not fix all of your problems.
In contrary to the culture you're living in right now,
money is not the single most important thing. If you
live your life like that, you're going to be horrifically disappointed.
Speaker 2: But you know, there's just so many different parts to it.
Speaker 3: The other thing is, I've got a young cousin that
just started working for me, and he's starting out kind
of you know, starting out on the bottom round. And
he's been more of a philosophy, philosophy, major international religions,
things like that.
Speaker 2: More of an artistic guy.
Speaker 3: But like he and I were discussing, I was like, look,
if you're trying to understand the world around you and
you don't understand the money financial component, you do not
understand the world around you, right, because it is the
baseline foundational whether you want to acknowledge it or not.
If you don't have a financial education, you don't have
an education, right right, You just you don't know what
you don't know.
Speaker 1: And people can get a little bit of that education
from your webinars that you host on the regulars.
Speaker 2: Yeah, the best man, right, Rabbit, it's impressive.
Speaker 3: Okay, So if you've thought we've sounded interesting, if you
like our little roth hack and want to know the
other kind of stuff that we can do, and we
do offer a lot of services that are different. We've
worked with several high network people that have really big
concentrated positions in a single stock or helping them make
that tax efficient and also guard them against that stock dropping.
So there's a lot of other sophisticated things that we
can do that other shops don't. But you can learn
about all of that go to Bulwerkcapitalmanagement dot com.
Speaker 2: Sign up there free of charge and yeah, thank you, ladies.
Investment advisory services offered through Trek Financial loc and SEC
Registered Investment Advisor.
Speaker 3: The opinions expressed in this programmer for general informational purposes
only and are not intended to provide specific advice or
recommendations for any individual or on any specific security. Any
references to performance of security so it thought to be
materially accurate and actual performance may different.
Speaker 2: Investments involved risk and are not guaranteed. Past performance doesn't
guarantee future results. Trecting for through Zeroly