The Ticking Tax Time Bomb: What to Do to Protect Yourself Now and in The Future with Jude H. Wilson: An EOFire Classic from 2021

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. are brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Imperfect Action. Today, we're pulling a timeless EO Fire episode from the archives, so the giveaway may not be active, and we'll be breaking down the ticking tax time bomb, what to do to protect yourself now and in the future. To drop these value bombs, I have brought Jude H. Wilson into EO Fire Studios. Jude is all about building and protecting wealth, and it's been a lifelong pursuit for him.

0:35Through his guidance, he has provided his clients with the clarity and direction needed to successfully achieve their definition of financial freedom. Jude has earned an MBA and his Certified Wealth Strategist designation. And today, Financial will talk about your ability to create a better life for yourself and your family, how to have a complete financial plan, and how taxes are currently on sale and what you need to do about it, and so much more. And a big thank you for sponsoring today's episode goes to Jude and our sponsors. As business owners, it's part of our job to stay ahead of the curve.

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1:46These tools run on OpenAI's GPT model and both are designed to help you get more done all while growing a better business faster. Find out more about how to use AI to grow your business at hubspot.com slash artificial dash intelligence. Jude, say what's up to Fire Nation and share something interesting about yourself that most people don't know. What's up, Fire Nation? Man, I'm so excited to be here today, John. I tell you something that most people don't know about me is that I'm the youngest of nine. I stopped counting at over 35 nieces and nephews. My folks are Haitian immigrants who came to this country looking for a better life.

2:34And when you're Caribbean, Catholic, and have no cable, that's a formula for having a big family. Caribbean, Catholic, no cable. I'm one of those three. I am in the Caribbean. I'm in Puerto Rico. I've been here for four years now. So I know all about the ticking tax time bomb that was happening to me while I was living in San Diego, which is one of the reasons why I fled to the tax haven of 4 % Puerto Rico. So life is good for me here, brother. But listen, most people within Fire Nation aren't living on this beautiful paradise island called Puerto Rico. So we need to talk about that taking tax time, Bob.

3:14We need to talk about what my audience can do to protect themselves both right now and in the future. And listen, brother, you're the person for this. So before we go any further, break it down for us. What exactly is the ticking tax time bomb? Well, this is the way that I like to explain it to my clients. We are in a once in a generation low tax rate environment. We haven't seen these rates since pre-World War II, but yet our country is spending money like it's going out of style. And what that has created is a situation that's not only predictable, but it's inevitable that tax rates will go up.

3:57And I'm passionate about getting this information out. I feel like Paul Revere, except for saying the British are coming, I'm telling people the taxes are coming, the taxes are coming. The taxes are coming, Fire Nation. I mean, it's just a reality. You see everything that's happened in this world. I mean, COVID has changed everything. The government is spending trillions and trillions and trillions of dollars trying to keep this economy somewhat afloat. The money's got to come from somewhere. It's got to come from there from somewhere sometime. So this ticking tax time bomb is going to happen.

4:35And let's get a little specific for a second, Jude. How high do you actually think tax rates could go? If your audience is Fire Nation Googles this, they're going to find a ton of different opinions on this particular topic. But I tend to follow the experts. And one of the experts that I really love is a gentleman named David Walker. He was the former U.S. controller of the United States. And what the controller is, think of it like the United States super CPA and bookkeeper. And he said once that tax rates in his lifetime will double. And for one specific reason, he calls it a four-letter word.

5:18John, do you want to know what that four-letter word is? Break it down, brother. He calls that four-letter word math. He's already done the financial analysis. And that's really his belief based on the analysis that he's done. And let's be real with each other. It's possible he could be wrong, but it is almost inevitable that tax rates will go higher from where they are now. And the higher rates go, it's like having financial termites. It's eating away at your ability to create a better life for yourself and for your family. And listen, Fire Nation, only so many people can move to Puerto Rico.

5:54I mean, this is an island after all, and we do have a limit of the amount of people that can escape those tax termites. And I love how you broke down that four-letter word, math. I mean, it's just math. So let's kind of share numbers real quick. I mean, like, where about is the tax rate right now for most Americans? And where from everything that you've been reading and seeing is like maybe it's just a little range of where you could see it going to? Well, historically, if you look at where we're at right now, the top tax rate is 37 % on income. But at one point in time, the top tax rate in America, believe it or not, was 90%.

6:34Come on. In fact, there was a famous president, Ronald Reagan, and before he was president, he was a movie star. He said once he only made two movies per year because every dollar that he earned after that, he fell into that top tax bracket and it wasn't worth for him to make another penny. That kind of disincentivizing, it hurts the soul. I mean, we were built on capitalism. We were built on entrepreneurs getting out there, making it happen. And yes, some people created unbelievably vast fortunes. But I look back at some of those people, Vanderbilt, Rockefeller, and right now, like with Warren Buffett and Bezos and Zuckerberg and Gates.

7:15I mean, these people, it is unbelievable how much they are philanthropists, how much they're giving back to the world, how much now they're able to donate to amazing causes because they've been able to build unbelievable wealth as a result. So I think we've got to think like, hey, it's not just like black and white about like, wow, like it's either right or wrong. It's not that Fire Nation. What it is, is it's about can we get excited about creating wealth, building wealth, and then preserving that wealth. So should I be concerned? Should Fire Nation be concerned? Should we be concerned about this, Jude?

7:52Everybody, every American should be concerned about this. Now, in different proportions, you have some listeners who are making a high income, but probably haven't saved a lot of money yet. They're at the beginning of their journey. Well, they should be concerned because higher rates on their income is going to have less net in their pocket. The other group of people who they have probably already started saving and have built up quite a bit of a nest egg, and they're going to use that nest egg to replace their income someday. And they really need to be concerned because money that they're taking out of 401ks and IRAs, that's going to be fully taxable at whatever the current tax rates are.

8:37Fire Nation, really, you just need to be concerned. Everybody needs to be concerned if and when this is happening. And again, going back to that four little word, it's just math. So Jude, I like to be proactive. I like to give specific advice to my audience, Fire Nation. So break it down for us. What are some of the things that we could be doing now? What are some of the things that we should be doing now? Well, this is something that we talk about every day with our clients at our firm. As you know, John, we have a full service holistic planning firm. And we have a proprietary process that we call the GPS Wealth Navigator.

9:14It stands for guidance, planning and strategies. As part of that, we take people through a process that looks specifically at taxes, and you've got to start at creating a good foundation. You've got to start with understanding the order of money. Money comes in in three funnels. The first funnel we call the pre-tax funnel. You've already paid taxes on it in your paycheck or your business income, and then you've decided to put it in a tax-sheltered vehicle like a 401k or an IRA or pension. And when you pull that money out, that money is fully taxable at whatever current tax rates are. The next funnel is what we call the post-tax funnel.

9:59You've already paid taxes on that money and you've decided to put it into your savings account, a brokerage account, or invest it in some type of way. You're going to be taxed on that every year and receive a 1099. Now, the last funnel and my favorite funnel is the tax advantage funnel. Money's going to come into that funnel post-tax, but it's going to be tax sheltered in that funnel. So you're not going to be taxed on it yearly. And then when you decide to pull money out of that funnel, the money comes out tax free. Every individual should have their funnels in a specific order and amount that is customized to their situation and their goals.

10:42And what I find is that most people will have the pre-tax funnel, they'll have the post-tax funnel, but they don't have the tax advantage funnel. And that's something, that's the first thing that people should be working on. So I love these three categories, Fire Nation. Money flows in three categories. We're calling them tax efficient funnels. One pre-tax, two post-tax, and then three tax advantaged. And Fire Nation, if you think we're even close to being done dropping value bombs on this entire topic, you have another thing coming. We got some great things coming up as soon as we get back from thanking our sponsors.

11:22Success Story, hosted by Scott D. Clary, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Success Story features Q &A sessions with successful business leaders, keynote presentations, and conversations on sales, marketing, business, startups, and entrepreneurship. One of Scott's recent episodes was with none other than Jack Canfield, where they discuss adapting to life's twists and turns. Listen to Success Story wherever you get your podcasts. So Jude, before the break, we were talking about the three tax efficient funnels, which kind of brings me to another four-letter word, not math, but Roth.

11:59R-O-T-H, right brother? So talk to us about the other four-letter word. What is a Roth and how does this fit into these tax-efficient funnels? My favorite funnel, as I said before, is the tax-advantaged funnel. And what we find in that funnel, one of the major vehicles is a Roth. There are two types of Roth. There's a Roth IRA and a Roth 401k. And most people are under the misconception that you can only contribute a certain amount to the Roth. Well, that's true for the Roth IRA. Money that you put in that type of vehicle is post-tax dollars, and then when you pull it out, it's completely tax-free.

12:42And there is a limit to the IRA based on how much income. But being an entrepreneur and owning your own company, you can establish a Roth 401k and that has no income limit. Based on your income, you can put in the maximum to a Roth 401k. But it's got to be in conjunction with a complete financial plan. I don't like to see people go willy-nilly with this. I'm a big fan of this, Fire Nation. It was really one of the main and only things that I could do when I was living in San Diego to protect some of this net profit that my business was bringing in. So we were really utilizing this. We were really maxing this out.

13:25And you, Jude, talked specifically about how much you love tax advantage funnels in general. So how exactly do you help people? How do you help people like myself, like Fire Nation, like our audience right now in this world of tax? Well, I want to make sure and people understand something and be very clear about this. We are not CPAs or tax advisors. We're a full-service financial planning firm that looks holistically at every aspect of our client situation. And I don't think today that you can call yourself a true financial advisor if you're not looking at one of the biggest aspects of our financial life, which is taxes.

14:13So as clients come into our offices, one of the things that we do is we use our proprietary system, the GPS Wealth Navigator, to do complete analysis, find out where they are now, where they're trying to go. And as part of the analysis, they receive this tax map. It's seven steps on the map that allow us to analyze their situation from a taxable position and give real observations and strategies that they can use and talk to their tax professional about. Fire Nation, he keeps coming back to this word holistic. And I just like, number one, how it sounds, how it feels. But I want you to understand that's how you need to be approaching everything that you're doing in this life with this holistic vibe, with this holistic outlook, so that you can drive forward and be protecting yourself in every way, shape, and form.

15:09And Jude, one thing I talk about a lot on this show is avatars, your ideal clients. Who specifically is your avatar? What specific clients do you like to work with? Well, they fall into basically two categories. There are people who have a high income and they're doing really well in their business or their career, but Uncle Sam is knocking them upside the head and we need to help them put together some specific strategies to lower their taxable liability today and prevent the ticking tax time bomb tomorrow. So people who have a high income, those people are great for the type of services that we provide.

15:53But then there's a second set of people who they've already gone in their journey and they've built up quite a nest egg and they're ready to start taking money out of some of these funnels. But they haven't put the pieces of the pie together in the most efficient manner that's going to make sure they have the highest value that they can for themselves and potentially leave some money to the next generation, their kids and their grandkids. Those people really love us because we look at everything from their estate plan, their taxable situation, their retirement income. Those are really the two avatars that we serve the best.

16:32So I love how you really understand and know your avatar because fire nation when you understand at the core like jude does who you serve the best who your ideal client is You start to attract those individuals. You know where to look for them You know that when you get one of those avatars and you serve them unbelievably well That likely their friends are pretty similar to them because we're the average of the five people we spend the most time with So your avatar probably hangs out with other avatars in your world So think about that and the importance of it. And Jude, you shared a lot of knowledge, but if there was one thing that Fire Nation could really walk away with just about this whole ticking tax time bomb situation, what's the one thing you wanna make sure that we really get from our entire conversation?

17:17Well, the one thing I think if you get nothing else out of today, I like to give an analogy. You remember in the beginning of this COVID situation, toilet paper was being bought everywhere. I mean, you couldn't find a roll of toilet paper anywhere. Well, think of taxes like toilet paper. If I told you today, John, that a roll of toilet paper was a dollar, but next week, that same roll of toilet paper is going to be$100, what would you do today? I'd buy all the toilet paper I could find. Exactly. And that's what I want people to think about when it comes to taxes. Taxes are literally on sale today.

17:58And so we should be moving money from dollars that will always be taxed to dollars that will never be taxed. Buy your taxes on sale today. I love that phrase, Fire Nation. Remember that now is the time you can do just that. And Jude, give us a call to action. Where can we find out more about you? Where can we go to collect a gift from you or more information? Break it down. Well, one of the things that we've done specifically for your audience is we've created the Entrepreneur Action Plan. Five things that you need to know about this situation and some actions that you can take today. And they can get that at jude.com slash fire.

18:42Fire Nation, you know that you're the average of the five people you spend the most time with. And you've been hanging out with J-Dubs and J-L-D today. so keep up that heat and if you head over to eofire.com and type Jude, J-U-D-E in the search bar his show notes page will pop up with everything that we talked about today, best show notes in the biz, time stamps, links galore but of course Fire Nation please get your entrepreneur action plan you need this those five steps are critical for you to take action upon today so that entrepreneur action plan can be found at jude.com slash fire. Jude, thank you for sharing your truth, your knowledge, your value with Fire Nation today.

19:27For that, we salute you and we'll catch you on the flip side. Thank you, John. Thank you, Fire Nation. Hey, Fire Nation. Today's value bomb content was brought to you by Jude and successful entrepreneurs, they accomplish big goals. That's why I created the Freedom Journal to guide you in accomplishing your number one goal in 100 days, Fire Nation. And we're talking step by step. So visit thefreedomjournal.com. Use promo code podcast for a$15 discount as a thank you for listening to my podcast. And I'll catch you there or I'll catch you on the flip side. Success Story, hosted by Scott D. Clary, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals.

20:11Success Story features Q &A sessions with successful business leaders keynote presentations, and conversations on sales, marketing, business, startups, and entrepreneurship. One of Scott's recent episodes was with none other than Jack Canfield, where they discuss adapting to life's twists and turns. Listen to Success Story wherever you get your podcasts.