It used to be sound financial advice to max out the contributions on your 401(k) and IRA accounts. However, because of the anti-capitalist nature, the possibility is also on the table that the Obama Administration and/or Congress could nationalize your retirement accounts, and require they be “invested” in a government annuity or Treasury bonds – which pay a mere pittance in interest.
In light of these proposals (and a greedy federal government), what can you do to protect your wealth and lower your tax liability? Here are three solutions that can protect your finances against “Government Gone Wild:”
Solution #1 – Save in physical gold and silver outside of your retirement accounts, as a hedge against dollar devaluation and higher inflation. Store part of your holdings where you have immediate access (to use for barter and/or sell for cash as needed), and store some outside of the United States.
Solution #2 – Consider wise investments where you can lower (and even defer) your tax bill. Rental real estate that produces positive cash flow fits this description. The tax code allows property owners to take depreciation expense on the purchase price of a property for up to 27.5 years. Property investors can also defer capital gains on the sale of one or more properties by quickly re-investing the proceeds into one or more similar properties – also known as a 1031 exchange. With residential real estate you can borrow a significant amount of the purchase price and make your investing dollar go further. Keep in mind that debt and leverage are double-edged swords. Make sure you have enough cash reserves to cover the mortgage when one or more of your properties could be vacant. Consult with a competent tax accountant who works with successful investors, and attend monthly meetings of local real estate investing clubs. Talk with other attendees, and seek out the most knowledgeable and successful investors.
Solution #3 – Save in long-lasting food and even popular barter items such as cigarettes, wine, vodka and whiskey (even if you don’t drink or smoke). If we see higher (or even hyper) inflation… supply lines temporarily cut… and/or civil unrest, these items could be more valuable for you and your family. Alcohol and cigarettes will always be in demand, and are excellent barter items in more difficult economic times.
In summary, government fiscal and monetary policies are punishing savers and retirees. Although it seems counter-intuitive, your best plan of action now may be to build and protect wealth for the shorter-term, instead of saving for the long run.