SEP IRA, 401 (k) 'if RRSP's

One of the most common questions I "tax what investment instruments, such as self-pension (SEP) IRA, 401 (k) 's, and Canada, RRSP's. With the exception of Roth IRA and Roth 401 (k), these vehicles mainly on the long tradition That the payment of taxes is better than today, to pay taxes. In each of these (except Roth), the taxpayer receives a deduction for their contribution to today's investment plan to growdeferred taxes, while in the plan and are taxed at ordinary income when you stop the withdrawal plan.

Sounds like a great plan, right? Wrong! I just want my complaints about this type of investment instruments.

Before the tax benefits are based on the premise that if retired, it will be in a lower tax bracket you are now. Unfortunately, this is for many people, the true use of these vehicles, because evil will retire. However, if you want to retire rich, youlikely to be in a much higher tax bracket than they are now. Why? They have fewer deductions. No Recalls business deductions (there are retired people), without exception laden not apply to home mortgage interest rates. And when you retire you will probably need more disposable income than when you worked, why would you go see places and things.

Let me tell you a story of my client. For many years he was a successful businessman. He presented a very good pension plan, which hecontributed faithfully every year. Then he retired. Very few have paid taxes and was actually in a very low tax bracket, while he was in business. He no longer had all these deductions, when he retired. It 'was immediately possible in the highest tax bracket. He complained to me constantly for high taxes. But given the fact that he was retired and all his income is presented as distributions of retirement plan, there was nothing that I Could do for him. He just had to pay the tax.

According to Youvery little control over the funds. Who is it? The government. You control what you spend, how much you can add your investment and can be removed. I believe that this lack of control usually results in lower returns.

Third is not possible to use other tax assets. For example, you can produce any tax benefit (such as depreciation) owned by lower income taxes than others. You will not receive capital gains treatmentDividends and long-term stock gains. And, when you invest in a business (limited to a very complicated business within a tax deferred plan) will be difficult for your operating entity.

There are moments in which these systems can be very profitable. I know a number of options traders, the use of their self-directed IRA to exchange options. Because there are tax benefits in the course of trading in options, why not defer the tax? The same goes for hard money loans.

My gripe with the SEP IRA401 (k) if RRSP 'is that financial institutions and the government to push so that people think they are the only alternative. There are many ways for taxes, which saves a lot better for many people.