The Money Advantage Podcast

The Money Advantage Podcast


What to Do With Tax-Deferred Investments for Business Owners

October 21, 2019

Tax deferral may seem like the epitome of smart financial planning.  But tax-deferred investments can be a tricky trap like the spiderwebs that caught Frodo in Lord of the Rings.

https://www.youtube.com/watch?v=u322ezhxotg

How should you think about tax-deferred accounts if you’re a business owner?

In today’s conversation, we answer:

* What is tax deferral?* What are the underlying assumptions that make this advice so widespread and common?* When should I pay tax now, and when should I defer tax instead?

Then, we’ll give you the most important questions to decide whether you should use tax deferral.  We’ll show you why business owners should think twice before using tax-deferred investment accounts. And, we'll talk about the one circumstance in which tax deferral could benefit you.

You’ll gain clarity to find strategies that work best in your particular circumstance, to achieve your objectives.

What if you’re not a business owner?  This conversation still applies to you because tax deferral still works the same way.  You’ll understand your financial options better and be more equipped to make decisions that put you in control.

Where Do Tax Deferred Investments Fit into the Cash Flow System?

Selecting investments and their tax treatment is just one step in the bigger journey to time and money freedom.  You need to have all of the pieces in place to produce wealth systematically.

That's why we have created the 3-step Business Owner's Cash Flow System. It's your roadmap to take you from just surviving, to a life of significance, purpose, and financial freedom.

The first stage is the foundation.  You first keep more of the money you make by fixing money leaks, becoming more efficient and profitable. Then, you protect your money with insurance and legal protection and Privatized Banking. Finally, you put your money to work, increasing your income with cash-flowing assets.

Investing is part of stage 3.  It’s here that you select the best opportunities that help you achieve your goals, as well as the tax structure surrounding those investments.

What Is Your End Game?

Before you set out to determine the wisdom and validity of using a particular financial product or strategy, you first have to know your end goal.

That’s because there are no bad products.  There are only bad strategies. 

More specifically, some strategies won’t work to get you where you want to go.  For instance, a train is a fabulous invention, but it can’t get you from Boston to Sydney, Australia.

You first need to know if you want to defer tax. 

Two Financial Destinations

When it comes to financial goals, one destination is financial freedom, where you have passive income (income from assets) that surpasses your monthly expenses.  When your income is from assets, you no longer need to work as a source of income.  To get there, your strategy will need to include investing in assets that produce cash flow returns.  To apply this strategy successfully, you become an active investor and invest in what you k...