1216 SVC Digital
The
Bauman Letter — Your Guide to Rogue Freedom & Bold Prosperity —
Ditch That 401(k) and Take Control of Your Retirement
H
IS proud face, weathered by years of honest
candidate’s promises, the new administration was
work, betrayed his true feelings.
already discussing plans to eliminate Social Security and Medicare. The Speaker of the House had just
He’d worked as a senior manager for the
announced his intention to do so by 2020, and the
company for all his adult life. He’d paid into its
new president’s appointees for the Social Security
pension scheme, and then into its 401(k) plan when it
Administration were all known supporters of that
was converted in the 1990s. That, plus shares in the
goal.
company itself, constituted his entire financial future when he retired.
“McDonald’s, here I come,” he thought bitterly. And not just for the cheap meals … he’d probably
But all that preparation meant nothing when his
end up flipping burgers until he could no longer lift a
ex-employer went bankrupt and the administrators of
spatula.
his 401(k) plan deprioritized it. They were no longer receiving fresh contributions from the company or its
The worst thing about it was he had had options …
now-unemployed workers and management.
options that he could have taken, but didn’t.
A combination of inattention, poor investment
Now it was too late.
choices and high fees cut his prospective retirement earnings in half. The biggest hit came when the
Take Charge of Your Money
value of U.S. Treasurys tanked when a new president
If you’re leaving a job that came with a 401(k), or if
announced plans to renegotiate U.S. public debt.
you’re still working for the same employer and you’re
And of course, his company share holdings were
already older than 59½, you have a choice to make.
now worthless.
The same goes for 403(b) plans, government 457(b)
To make matters worse, one day he woke up
plans, military retirement plans and all other types of
to the post-election news that, despite all the
qualified retirement plans.
Inside This Issue 10 | New Zealand Vault Expands Its .
11 | Wealth Protection
Capacity for Bullion Storage
North of the Boarder
13 | America’s Vital Continuity
By John Mulvey
By Andy Schectman
www.sovereignsociety.com
By Bob Bauman JD December 2016
You can choose to risk your future by leaving your
Why I Hate 401(k)s — and You Should Too
money in someone else’s hands or take charge of your future yourself.
Your main retirement vehicle wasn’t meant to be
You can leave the 401(k) as it is, if your ex-
a 401(k) plan; they aren’t designed that way. As a
employer lets you. But think about the risk.
result, I and many other commentators agree that,
You’ll no longer have a company HR team to help
overall, 401(k)s have been a failure.
you with plan questions.
To begin with, the 401(k) plan was never meant to
You may be charged higher 401(k) fees as an ex-
be a mainstream pension plan. It was envisaged as
employee.
a voluntary program intended to supplement other retirement savings.
You won’t be able to make additional contributions.
In fact, the 401(k) account came into being by
Above all, you have no control over how your
accident, as a clause in the Revenue Act of 1978. The
retirement kitty is being invested.
clause said employees could choose to defer some
Or you could cash out. Bad idea! It sabotages your
compensation until retirement, and they would not
retirement and comes with huge penalties and taxes
be taxed until that time. (Companies had long offered
levied by the IRS. You’ll pay a 10% early withdrawal
deferred compensation arrangements, but employers
fee, plus ordinary income taxes on the amount
and the IRS had been going back and forth about their
distributed.
tax treatment.)
That means you might hand over up to 40% of
But a benefits consultant named Ted Benna
your accumulated 401(k) money right off the top.
realized the 401(k) provision could be used as a retirement savings vehicle for all employees.
But there’s a third option: a 401(k) rollover. This option allows you to transfer your balance
In 1981, the IRS clarified that 401(k) plan
into another retirement account that you can control
participants could defer regular wages, not just
— like a self-directed IRA — while keeping the
bonuses, and 401(k) plans began to proliferate.
money tax-deferred.
By 1985, there were 30,000 401(k) plans in existence. Ten years later, that figure topped 200,000.
In this report, I’m going to show you how to do it …
By 2013, there were 638,000 plans in place with 89
and why you must do so now if you can.
million participants. Assets in 401(k)s totaled $4.8
About Ted Bauman
trillion as of March 2016. The reasons for the shift are complex, but the main
Ted Bauman is the editor of the Plan B Club, a blueprint to help protect your wealth and escape excessive taxation, regulations and wealth confiscation in America. He is also the editor of The Bauman Letter, a newsletter that’s brimming with up-to-the-minute asset protection strategies, tips on buying and investing in real estate abroad, and retirement and residency secrets in American-friendly countries around the globe. Ted has been published in a variety of international journals, including the Journal of Microfinance, Small Enterprise Development and Environment and Urbanization. Email Ted your thoughts and questions at [email protected]
ones are that workers overestimated the prospect of amassing retirement wealth with a 401(k). The second is that employers found that providing a 401(k) plan cost them less … and they could pass those hidden costs on to employees. But there’s another less understood reason. For the most part, 401(k) administrators offer plan holders investment options that focus on funds from which they get a “kickback” of some sort. It’s hard to quantify the hidden opportunity costs of those self-interested choices — what you lose
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by being forced to use a plan provider’s proprietary
showed that an additional 1% in fees over a 30-year
funds with lower returns instead of more efficient
investment can reduce a plan’s final value by as much
investment vehicles.
as half. A worker who makes $75,000 per year and saves 8% of that annually in a 401(k) would lose 2.8
For example, did you know a price war in
years’ worth of savings in a target-date fund with a
exchange-traded funds (ETFs) has been going on recently? Many basic index ETFs are offered
0.2% fee and 11.6 years in one with a 1% fee, over the
at no
course of a career.
commission and are among the lowest-cost funds on
Think of that: 11.6 years of your life eaten up in
the planet. Those options rarely turn up in a 401(k).
fees.
Indeed, compared with other retirement accounts,
But the reality is even worse: The average cost you
such as IRAs or taxable brokerage accounts, 401(k) s have far fewer investment options. You’re usually
pay for a work-sponsored 401(k) plan today is about
stuck with the basic asset classes of cash, bonds and
1.44% a year of total assets invested.
stocks. No ETFs, commodities, currencies or emerging
By contrast, even a simple ETF-centered IRA costs
market funds.
approximately half as much — 75 basis points, or $75 for every $10,000 invested.
Even within these limited options, most owners of 401(k)s also turn out to be poor investors, since the
Things may be about to get much worse.
infrastructure for managing them is so poor. They
Earlier this year, Department of Labor regulations
make mistakes like selling low and buying high or shying away from optimal asset classes at the wrong
went into effect requiring plan providers to disclose
time.
the amount in fees that both companies and their employees pay for their 401(k) plans.
Folks who’ve studied the effect of investment
That rule may be slated for extinction by the
choices on 401(k) savers have found that a retirement income shortfall is more likely when 401(k) owners
incoming Trump administration, which is already
choose their own asset class allocation. If they can
packed with fee-loving Wall Street insiders.
also choose their stock investments, the odds of a
The result of all these shortcomings in 401(k)s?
shortfall rise further.
About 60% of American households were at risk of
Fees are another big problem.
being unable to maintain their standard of living as
Many hidden parties take an administrative fee
of 2013, a figure barely changed from a year earlier —
from your 401(k). There is the custodian, who charges
even though a strong bull market should have pushed
a fee to hold the assets; the reporting firm that
savings higher, and the government gives up billions
generates regular statements showing the assets’
in tax revenue to subsidize the plans.
performance; and the plan manager who either
Roll Over and Play the Markets Yourself
charges a flat fee to the employer or a percentage of the total assets to the employee. A fund’s “expense ratio” can encompass
There’s nothing stopping you from getting off the
everything from marketing fees paid to the
401(k) gravy train … a train from which someone else
investment firm to commissions paid to the broker
eats the gravy.
who recommends specific funds.
Most people know that if you take an early
One analyst who has studied the matter concludes
distribution from a 401(k) (or an IRA), you must
that “as a result of high fees, fund balances in 401(k)
include it in your gross taxable income for that
plans are about 20% less than they could be.”
year, pay tax on that income and pay a 10% early
A study by retail investment behemoth Vanguard www.sovereignsociety.com
withdrawal penalty tax. 3
December 2016
However, there is nothing stopping you from
If you had three IRAs, for example, you’d have to
transferring money from one retirement vehicle to
roll them over one at a time over a three-year period.
another — a “rollover.”
But fortunately, the same ruling said the one-peryear limit doesn’t apply to rollovers from traditional
Done the right way, you can move your entire retirement kitty out of the hands of unaccountable,
IRAs to Roth IRAs (i.e., conversions), trustee-to-
high-fee plan administrators and into a retirement
trustee transfers to another IRA — or for 401(k) plan-
vehicle that allows you to invest yourself … even to
to-IRA rollovers.
invest abroad and outside the vulnerable U.S. dollar.
That means that if you have multiple 401(k)s from previous employers, you can consolidate them into a
There are two basic types of rollovers:
single self-directed IRA all at once.
1. Direct and trustee-to-trustee rollovers: This
On top of that, another recent IRA rule allows you
is where you ask your current retirement plan administrator to transfer funds directly to another
to transfer any extra post-tax contributions you’ve
IRA, or issue you a check or checks made payable to
made to a 401(k) tax-free.
your new account. No taxes are withheld from your
That’s a huge advantage. It gets around the income
transfer amount in this instance.
and contribution limits to Roth IRAs. It means you
2. The 60-day rollover: You can have a distribution
can contribute up to $58,000 a year of after-tax
from an existing retirement plan paid directly to
income to a 401(k), safe in the knowledge that you
you. If you deposit all or a portion of it in an IRA or
can add it to a Roth IRA in the future.
a retirement plan within 60 days, it isn’t counted as
Finally, another new rule says there is no income
a withdrawal, and you ultimately won’t pay taxes or
limit on converting a 401(k) to a Roth. Before 2010,
penalties. However, your employer must withhold
you could not make the switch if your adjusted gross
20% of the rolled-over amount for the IRS, even if
income was more than $100,000, whether married or
you indicate that you intend to roll it over into an IRA
single.
within 60 days.
The SD-IRA: Your Ticket to Control
You’ll have to come up with the 20% that was withheld when you set up a new IRA — if you don’t, that portion will be considered a distribution, and
Back in May 2015, I wrote a report on the best IRA
you will also owe a 10% penalty on that money if you
option there is … the self-directed IRA (SD-IRA). If
are under age 59½. When you file your income tax
you haven’t already read it, I encourage you to do so
return, however, you will receive credit for the 20%
ASAP.
withheld by your employer.
There’s about $17.5 trillion in all U.S. private
Several recent changes to IRS rules make rollovers
retirement plans. More than 25% of it is in personal
like these easier and more attractive than ever.
IRAs. For a clever few, some of that money is in SD-
For many years, you couldn’t make more than one
IRAs … about 2% of the total.
rollover from the same retirement plan within a one-
But that total is growing, as folks find that a more
year period, or a rollover from the new IRA into which
flexible approach to retirement planning provides the
the distribution was dispersed. But you could roll over
best returns and asset protection.
from multiple IRAs into a new one.
An SD-IRA is a critical tool in these troubled
Then, beginning January 1, 2015, the IRS ruled that
times. It’s legal, profitable and can be as simple or as
you can make only one rollover from any IRA to a new
complex as you’d like it to be.
IRA in any 12-month period, regardless of the number
Best of all, it can open offshore opportunities for
of IRAs you own. December 2016
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your retirement investments that are unavailable in
An SD-IRA allows you to invest in things like
any 401(k).
real estate, including residential and commercial properties, farmland and raw land — both U.S. and
In most respects, an SD-IRA is just like a
foreign. You can invest in private companies or fund
conventional IRA. You can have multiple IRAs, so
a startup business or other venture. This is especially
an SD-IRA can coexist with others. Capital gains,
attractive if the startup does well: Your IRA’s value
dividends and interest earnings within the account
will increase along with the fair market value of the
incur no tax liability. Contributions are tax-deductible
company.
if it’s a traditional IRA. Distributions are taxed as ordinary income and can begin when you turn 59½ or
An SD-IRA can make private loans. It can invest
if you become disabled.
in any area where you might have expertise. You could direct parts of your SD-IRA into currencies,
You can withdraw funds for qualified unreimbursed
commodities, hedge funds, commercial paper, royalty
medical expenses that are more than 7.5% of your
rights, intellectual property or equipment and leases,
adjusted gross income (AGI), or for qualified higher
mineral rights … or even golf courses and race horses.
education expenses for yourself, your children and grandchildren. When you die, your spouse can roll
And you can invest in gold bullion or other precious
both of your IRA accounts into one IRA account.
metals. Of course, it’s all tax-deferred for a traditional SDIRA, or with tax-free appreciation and withdrawals if you choose a Roth SD-IRA.
About 60% of American households were at risk of being unable to maintain their standard of living as of 2013, a figure barely changed from a year earlier — even though a strong bull market should have pushed savings higher, and the government gives up billions in tax revenue to subsidize the plans.
And if you like, you can do some or all of it outside
the U.S. and the U.S. dollar.
Roth or Traditional? OK. Let’s say I’ve convinced you to roll your 401(k) over to an SD-IRA. Roth or traditional? In February this year, I wrote a report about your IRA options. Here’s a quick recap. Both traditional and Roth IRAs allow you to contribute “earned” income — i.e., salary or wages, even if from your own business — into a taxsheltered retirement account that can be invested in a variety of ways. (“Unearned” or “passive” income from investments, rentals, inheritance, insurance
The big difference is that with an SD-IRA, a
payouts, pensions and government benefits isn’t tax-
specialist IRA “custodian” permits you to actively
deductible when paid into to an IRA.)
choose and design investments far beyond everyday
The defining feature of each type of IRA is its tax
stocks, bonds and mutual funds. You can invest in real
treatment:
estate, private mortgages, private equity, precious metals, intellectual property ... and much more.
• Traditional IRA: You receive a tax deduction now — i.e., reduce your current income for tax
You can reap incredible gains, tax-free, on both the income from your investments and their underlying
purposes — for the contributions you make.
appreciation … gains that go way beyond what a
Your money then grows tax-deferred, meaning
conventional IRA custodian can provide.
you don’t have to pay taxes until you begin
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December 2016
withdrawing from the account later, when you
1. Growth and withdrawals are tax-free. You
will be taxed at your marginal rate at that time.
contribute after-tax dollars to a Roth IRA. They can’t be taxed twice. Moreover, any earnings from the
• Roth IRA: There is no tax deduction for your
investments in the account — and therefore money
contribution — you pay into the account with
you take out in retirement — is free from federal
after-tax earnings. However, the money grows
taxes (and usually state and local taxes too) with one
tax-free, so when it’s time to withdraw the
condition: Withdrawals from Roth IRAs are income
money, you don’t have to pay taxes on any of
tax- and penalty-free if the first withdrawal is made
it, including the investment earnings on your
after a five-year period beginning with the first
original contributions.
taxable year a Roth IRA contribution was made.
The simple rule of thumb is that if you can afford it,
This restriction doesn’t apply, however, if the Roth
and if you are eligible, a Roth IRA makes more sense if
owner is age 59½ or older, disabled or deceased.
you think income taxes are going up in the future.
And you can take out $10,000 tax- and penalty-
Now, I realize most people think taxes are going
free if you’re a “first-time homebuyer” (i.e., you
to fall in the next few years under a Republican
haven’t owned a house for at least 24 months) of a
president, House and Senate. They probably will. But
principal residence for yourself, your spouse or your
current plans will raise the already-grotesque federal
descendants.
deficit by as much as $11 trillion.
2. There are no required minimum distributions
That suggests two scenarios.
(RMD) during the lifetime of the original owner. Traditional IRAs (and, generally, 401(k), 403(b) and
First, the Democrats could reclaim the government in 2020 — which is entirely possible if Republicans
other employer-sponsored retirement savings plans)
push ahead with plans to abolish Social Security and
require you to take money out. If you don’t need your
Medicare. Democrats will raise taxes in a desperate
distributions for essential expenses, RMDs can be
attempt to pay down the deficit.
a nuisance — or worse, force you into a higher tax bracket. If you miss taking one, there could be a big
Second, the GOP could hold on to Washington for
penalty: 50% of the RMD.
the next eight years. History shows that one party hardly ever holds the White house for longer than
3. Leave tax-free money to heirs. A Roth SD-IRA
that. That means taxes will go up from 2024.
can have legacy and estate-planning benefits. For instance, if you’re planning to leave your retirement
But there are other things to worry about.
savings to your heirs, it will affect their taxes. RMDs
The higher federal deficits and protectionist policies
from inherited traditional IRAs constitute taxable
promised by the incoming Trump administration will
income for heirs, often during their peak earning
rapidly undermine the U.S. dollar. They will also lead
years, which could push them into a higher marginal
to inflation and slower growth, as the global economy
tax bracket.
contracts in an era of reduced trade.
Even though RMDs are required for Roth IRAs that
If your retirement kitty is concentrated in dollar-
have been passed on to heirs, those distributions
denominated assets, you are going to lose both ways
remain tax-free and don’t push up your heirs’ taxable
— eventual higher taxes and less purchasing power
income. Moreover, because Roth IRAs don’t require
for your retirement dollars.
RMDs during your lifetime, they can grow larger for your heirs than a traditional IRA.
To me, all this clearly points to a Roth SD-IRA.
Best of all, because you pay income taxes up front,
Of course, there are other advantages to a Roth SDIRA than just defense against inevitable tax increases.
a Roth IRA can help reduce the size of your taxable
Let’s consider the main ones:
estate, since it isn’t included in that calculation.
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4. Have tax flexibility in retirement. Mixing how
Estate tax (if any) won’t apply at the time of transfer.
you take withdrawals between your traditional IRAs,
Note that if a non-spouse inherits a Roth SD-IRA,
401(k)s or other qualified accounts, and Roth IRAs
he or she cannot combine the Roth SD-IRA with his
allows you to fine-tune your overall income-tax
or her own, cannot make additional contributions
liability in retirement. For example, you could take
and must make RMDs. Moreover, if the Roth IRA is
withdrawals from a traditional IRA up to the top of
less than five years old, income tax may apply to
that year’s tax bracket, and then take any money you
distributions to the non-spouse and estate tax (if any)
need above that bracket from a Roth IRA, tax-free.
will apply.
5. Help reduce or avoid the Medicare surtax. A Roth
Do You Stand to Benefit? Yes!
IRA may help limit your exposure to the Medicare surtax on net investment income. This is because
A while back, Fidelity Investments conducted
qualified withdrawals from a Roth IRA don’t count
a survey that revealed that more than half the
toward the modified adjusted gross income (MAGI)
respondents didn’t know they could roll over the
threshold that determines the surtax.
assets in a 401(k) account directly into a Roth IRA.
RMDs from a traditional IRA are included in the
Only one-fourth of the respondents said they had
MAGI and do not count toward the MAGI threshold
ever considered rolling 401(k) assets from a former
for the surtax. And unlike distributions from a
employer to a Roth. Yet, after they were told about the
traditional IRA, qualified Roth distributions do not
benefits of a Roth IRA, nearly 60% said they would
affect the calculation of taxable Social Security
like to so.
benefits.
For good reason! Let’s consider some cases where
6. Use your contributions at any time. A Roth IRA
rolling over your 401(k) to a Roth SD-IRA would make
enables you to take out 100% of your contributions
sense.
at any time and for any reason, with no taxes or penalties. After all, you’ve already paid taxes on them.
• If you’re a high-income earner who’s been
If you withdraw investment earnings from a Roth
phased out of contributing to a Roth, you are
IRA within the five-year period I mentioned above,
now able to get into a Roth IRA with ultimately
you’ll pay tax on that, but generally, withdrawals
no out-of-pocket costs. For instance, in tax
are considered to come from contributions first.
year 2016, you cannot make a full contribution
Distributions from earnings begin only when all
to a Roth IRA if your individual income is more
contributions have been withdrawn.
than $117,000, or if your joint income is more than $184,000. Contribution limits for IRAs are
7. You can continue to contribute as long as you
$5,500 a year, plus an extra $1,000 if you’re 50
work. If you have earned compensation, whether it
or older. That pales in comparison with 401(k)
is a regular paycheck or 1099 income for contract
limits.
work, you can contribute to a Roth SD-IRA, no matter how old you are. There is no age requirement for
• If you made after-tax contributions to
contributions, as there is for a traditional IRA, where
traditional 401(k) plans throughout the 1980s
you cannot contribute if you are older than age 70½,
and 1990s, before the advent of the Roth IRA
even if you have earned income.
and Roth 401(k).
8. Combine your Roth with your spouse’s in your
• If you want to build up a Roth SD-IRA with the
will. Your spouse can be the sole beneficiary of your
goal of passing it on to your heirs. You can roll
Roth SD-IRA, while also owning a separate Roth IRA.
the after-tax funds into a Roth SD-IRA, so they
He or she can then combine the two Roth IRAs into a
will not be required to take required minimum
single plan without penalties, making contributions
distributions during their lifetime. That leaves a
and otherwise controlling the account as usual.
bigger pile of money for heirs.
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December 2016
• If you’ve already make the maximum
Rolling Over Your 401(k) to an SD-IRA
contribution to all your tax-advantaged retirement accounts and simply want to save
If you want to take my advice and roll over
more.
an entire 401(k) balance to an IRA, the rules are
• If you’ve delayed saving for retirement and
straightforward.
need to save more than standard 401(k) and IRA
For a traditional 401(k) or IRA, the plan
limits currently allow.
administrator will distribute the funds to you in
• After you reach age 70½, you’re required to
two separate checks — one representing all your
take minimum required distributions from a
pretax contributions, the other for any after-tax
401(k), 403(b) or traditional IRA every year,
contributions you may have made over the years. You
even if you’re still working. If you plan to work
will then deposit those into a new Roth SD-IRA.
after age 70½, rolling over into a Roth SD-IRA
Partial distributions of a 401(k) balance, on the
allows you to defer taking distributions.
other hand, are trickier.
As I said above, Roth IRAs stand alone as the
For example, let’s say you have $1 million
tax-sheltered retirement plan that does not
in a 401(k), with $800,000 coming from pretax
require RMDs. That will allow you to continue
contributions and $200,000 coming from after-tax
accumulating money in your Roth IRA while you
contributions.
are forced to draw down the balances of other retirement accounts. It makes it far less likely
Unfortunately, you can’t “isolate” the after-tax portion of your 401(k) and roll just that portion over
that you’ll ever outlive your money.
RETIREMENT PLAN CONVERSION CHART TO Roth Qual. 401(k) Roth Trad. Simple SEP- Gov. Plan 403(b) 403(b) IRA IRA IRA IRA 457(b) (pre-tax) (pre-tax) 457(b) Roth IRA
Yes
No
No
Trad. After IRA Yes Yes 2 years
FROM
Simple IRA
After After 2 years 2 years Yes
No
No
No
No
No
Yes
Yes
Yes
Yes
No
After After After After 2 years 2 years 2 years 2 years No
SEP- After IRA Yes Yes 2 years
Yes
Yes
Yes
Yes
No
Gov. 457(b)
Yes Yes
After 2 years
Yes
Yes
Yes
Yes
Yes
Qual. Plan (pre-tax)
Yes Yes
After 2 years
Yes
Yes
Yes
Yes
Yes
403(b) (pre-tax) Yes Yes
After 2 years
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
Roth (401(k), 403(b), 457(b) December 2016
Yes
No
8
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to a new IRA. As per my example, you can’t take a
an SD-IRA allows you to move some or all of your
distribution of $200,000, claim the entire amount
IRA assets into foreign assets, and above all … assets
consists of after-tax contributions, and roll it into an
denominated in currencies other than the U.S. dollar.
SD-IRA.
To me, that is the most important thing of all. We
Instead, you must obey the conversion “pro-
tend to focus our fears of the future on confiscation
rata rule.” It forces you to roll over a proportionate
of our wealth by the government. But I don’t think
amount of both pretax and after-tax funds relative to
that’s the biggest threat.
the value of the entire account.
If our government were to confiscate gold … our national creditors feared nationalization of assets …
For example, if your 401(k) account is made up of 80% pretax funds and 20% after-tax funds, a
as has happened in places like Venezuela … the U.S.
$200,000 partial distribution must be split into a
economy would rapidly collapse.
$160,000 pretax portion and $40,000 after-tax
In the event of that kind of confiscation, dollars
portion. The only way to roll over all the after-tax
and U.S. Treasurys would be dumped so fast that
portion of your 401(k) into an SD-IRA is to roll over
interest rates would go double digit overnight. Above
the entire 401(k) account, not just part of it.
all, the dollar would fall precipitously.
What about the actual process? As with most things
If the dollar dives as badly as I think it will
related to tax, there’s a right way … and a wrong way.
eventually, I believe we face the real prospect of currency controls. If your retirement assets are stuck
For example, you don’t want the 401(k) administrators to cut a check in your name. That
in the U.S. and denominated in U.S. dollars, you are
counts as a distribution, and you may lose up to one-
stuck.
third of your balance to taxes and penalties.
But if you’ve got an SD-IRA invested in offshore assets and other currencies … you are free as a bird.
Here’s the four-step process for how to roll over a 401(k) into an IRA. As with any big decision, it’s
Which would you rather be?
always good to know your options before you go all in, so let’s start there.
Contacts
1. Decide on a Roth or a traditional IRA. If you roll into
There are many potential custodians who
a Roth IRA, you’ll owe taxes on the rolled amount.
specialize in self-directed IRAs. I like NuView IRA.
2. Open a rollover SD-IRA account with a good
They impress me with the range of options available,
custodian like the one I recommend at the end of this
including real estate, precious metals and even more
report.
exotic and profitable options like tax liens. They can
3. Instruct your current 401(k) plan disintegrator
be contacted as follows:
to do a “direct rollover.” These two words are
NuView IRA
important: They mean that the 401(k) plan will
Tyler Carter
transfer funds directly to your new SD-IRA account,
Director, Business Development
not to you personally.
[email protected] www.nuviewira.com
4. Start investing your way.
Tel: +1-877-259-3256
Conclusion —Preparing for the Hidden Danger
One of the attractions of NuView is their rate schedule. They charge just $50 to open an account. It costs $95 to fund an entity such as an LLC through
I want to finish off with a few observations on
the IRA, $50 for international wire fees and $295 as
the “offshore” aspect of SD-IRAs. As I said above, www.sovereignsociety.com
an annual maintenance fee for the account. n 9
December 2016
n Forbidden Knowledge
New Zealand Vault Expands Its Capacity for Bullion Storage By John Mulvey
I
N the August 2016 edition of The Bauman Letter, Ted Bauman wrote about how you can easily open a safe-deposit box in New Zealand online, then purchase bullion and have it deposited in your box by international accountancy firm Grant Thornton acting as your agent.
Best of all, the specific system created by New Zealand Vault makes your bullion holdings nonreportable to the U.S. government under present laws. Those of you who attended the Total Wealth Symposium conference in Bermuda this year may have met me — John Mulvey, CEO and owner of New Zealand Vault. While there have been several owners, New Zealand Vault has been operating since 1931. It is privately owned, independent of the government and the New Zealand banking system, making it the ideal choice for storing precious metals safely and securely. In geographic terms, you can’t get much farther away from the U.S. than New Zealand. But this isolation is one of its greatest assets. New Zealand is an island nation in the South Pacific, with a land mass like that of the United Kingdom. It has a developed economy, is politically stable, and has a respected judiciary system and one of the soundest banking systems in the world. In many surveys, it is considered the least corrupt country in the world. As Ted reported in August, New Zealand Vault has developed an innovative and simple solution for opening a safe-deposit box and purchasing bullion online. You can control access to your box for buying and depositing bullion and selling it if the need December 2016
arises through international accountancy firm Grant Thornton. They will hold your key in their safe custody and only act on your written instructions. In response to booming demand, New Zealand Vault is happy to announce a second treasury-grade vault in Wellington that will sit alongside the existing safe-deposit vault. This new facility will be set up specifically for institutional bullion investors, wealth-management businesses, wholesalers and family offices. Bullion will be stored in a series of large, high-end safes enclosed in the new vault. In addition, the new vault will contain a further 1,200 safe-deposit boxes for individual retail clients. The vault will be fitted with the most sophisticated multilevel electronic protection available, complete with 24/7 active monitoring. The existing partnership with Grant Thornton will also extend to the new vault, ensuring the utmost privacy and security levels for clients is maintained. In addition, New Zealand Vault has employed a marketing director to assist offshore clients — Kirsten Clark — and is in the process of recruiting additional staff to ensure the exceptional customer service for which New Zealand Vault is well-known. The new vault is scheduled to open early 2017, but in the meantime, boxes are still available within our existing Wellington and Auckland vaults. If you are interested in buying or storing bullion in a safe-deposit box, New Zealand Vault has a very simple process that can be done online by visiting www. nzvault.com. Alternatively, you can email support@ nzvault.com or call +64-4-915-1168. n John Mulvey is the Managing Director and owner of New Zealand Vault Limited. John was a former senior executive from the banking sector and established business 10 www.sovereignsociety.com
n Unfiltered Insider
Wealth Protection North of the Border By Andy Schectman
I
’VE had a long association with The Sovereign Society and have been good friends with Bob Bauman for years. I was thrilled when his son Ted started writing The Bauman Letter. The other day, I was chatting to him about the great increase in the number of readers lately … which made me realize that many of you may not know about my firm, Miles Franklin Ltd.
Protect Your Bullion in Canada Miles Franklin is an unusual gold and silver bullion coin company. We have yielded positive results for clients since 1989. My father, Andrew Schectman, and I founded it. Our vision was to offer a wide variety of bullion and numismatic products, extensive broker expertise and fair pricing. But we also provide secure bullion storage. When you purchase gold and silver from us, you are offered the option of storing your purchase in Toronto, Montreal or Vancouver, utilizing our strategic alliance with Brink’s International. Of course, you can also store your own existing bullion with us and send us more at any time. Our one-of-a-kind private safe-deposit box program in Toronto and Vancouver allows you to store gold or platinum — even U.S. dollars, Canadian dollars or Swiss Francs — in a private, insured safe-deposit box completely outside of the banking system. We’re also finicky about security and transparency. Because we are so dedicated to making this program the “gold standard” of offshore storage alternatives, Miles Franklin’s senior management accompanies our www.sovereignsociety.com 11
auditors on their diligent audits performed several times each year. Above all, unlike the industry standard of charging a percentage of bullion value, we fix your storage cost on a per ounce basis. In other words, if gold prices double, your storage costs remain constant.
Your Key to Wealth Protection Today I’d like to tell you about a new, one-of-a-kind segregated storage program we recently launched. We’ve spent more than a year creating a unique storage
Our one-of-a-kind private safe-deposit box program in Toronto and Vancouver allows you to store gold or platinum — even U.S. dollars, Canadian dollars or Swiss Francs — in a private, insured safe-deposit box completely outside of the banking system.
feature — again, with Brink’s Canada. The key feature is that while Miles Franklin and Brink’s are aware of the contents of your storage for auditing purposes, only you have the key. If you want to make a deposit, take a withdrawal or simply view your box’s contents, the only way it can be opened is if you go in person — or mail Brink’s the key with express written instructions, after which Brink’s will mail the key back to you. Here’s how it works. Your bullion — or other items December 2016
n Unfiltered Insider
— are counted and verified on camera, then sealed in a safe-deposit box and locked with a Brink’s seal. The seal number tab snaps into two pieces. You will receive the break-off tab from the seal on the box along with keys and a Brink’s inventory certificate signed by a Brink’s authorized employee, including handwriting the seal number on the certificate to ensure no tampering has occurred. The key, tab and certificate are then sealed in a Brink’s bag to ensure that it is tamperproof. The sealed Brink’s bag is now sent to you via UPS. If you wish to add to or withdraw from your storage box, you’ll ship your key to Brink’s Vancouver or Toronto directly — after you’ve sent the requisite paperwork to Miles Franklin in advance. We’ll coordinate a shipment on our UPS account by emailing you a UPS airway bill, which will include the complete address details for the package to be shipped to the vault manager at Brink’s Vancouver or Toronto. You can use any UPS drop-off box or UPS center. After your box has been opened and resealed, you
will receive your key back, including a new Brink’s seal and certificate in a bag each time. Whenever you want to reclaim possession of your precious metals, you’ll send the key as above. We’ll then move the bullion to our warehouse in Fargo, North Dakota, from which we will ship anywhere in the U.S. via UPS or U.S. Post Office insured. Given the increasing amount of political, monetary and legal risks the world faces, we believe this unique product is the perfect supplement to our current industry-leading segregated storage program. n Prior to starting Miles Franklin Ltd. in 1989, Andrew became a licensed financial planner, specializing in Swiss franc investments and alternative investments. At Miles Franklin Ltd., a company that has eclipsed $5 billion in sales, Andrew has developed an operation that maintains trust, collaboration, ethical behavior, and superior customer service and satisfaction to better serve their clients. He is responsible for overseeing the firm’s operations and business functions; including strategy and planning, account management, finance and new business.
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December 2016
12 www.sovereignsociety.com
n Chairman’s Corner
America’s Vital Continuity By Bob Bauman JD
A
s you may have noticed, the quadrennial U.S. presidential election produced a somewhat unexpected, and for many, uncomfortable result. Yet despite all the campaign drama about an alleged rigged election, both presidential candidates and the incumbent president immediately accepted the outcome without questioning its legitimacy. Long ago, Thomas Jefferson reminded us of the importance of that legitimacy: “The will of the people is the only legitimate foundation of any government and to protect its free expression should be our first object.” In our national history, has there ever been a more stunning, and for many, a more surprising example of the free expression of American voters? The U.S. Constitution, 229 years old, is the world’s longest surviving written charter of government, and it still works. When I studied at the Georgetown School of Foreign Service, I was assigned a report on the classic 1948 book The American Political Tradition by Richard Hofstadter. He quoted a great American writer whom I had the honor to know, John Dos Passos: “In times of change and danger, when there is a quicksand of fear under men’s reasoning, a sense of continuity with generations gone before can stretch like a lifeline across the scary present.” The late Will Rogers, a continuing source of common sense about American politics, might have been referring to 2016 when he wrote about the durability of our constitutional system: “Every time we have an election, we get in worse men and the country keeps right on going. Times have proven only one
www.sovereignsociety.com 13
thing and that is you can’t ruin this country even with politics.” On Election Day, I wrote: “The Wall Street Journal suggests that half the country will be deeply disappointed 24 hours from now, with losers thinking America is doomed; with winners relieved, but shocked and disgusted that nearly half of their fellow citizens voted for the moral equivalent of the devil.” Yet the immediate postelection remarks, first of President-elect Donald Trump, then of Hillary Clinton and of President Barack Obama, all recognized the wisdom of Abraham Lincoln’s admonition that “a house divided against itself cannot stand.” National unity, now and in the future, is a goal devoutly to be wished. I don’t mean unthinking surrender and compromise of principles, or bowing to forced agreements under pressure. There are available common solutions to our serious national problems, and now they must be debated and adopted. After the national election in 1862, a reporter asked President Abraham Lincoln how he felt about the results in New York, where a Democrat was elected governor. Lincoln famously responded: “Somewhat like that boy in Kentucky, who stubbed his toe while running to see his sweetheart. The boy said he was too big to cry, and far too badly hurt to laugh.” Whether this election produced tears or laughter for you, Americans should endorse Hillary Clinton’s good advice about Donald Trump: “I hope that he will be a successful president for all Americans,” she said. “We must accept this result and look to the future. We owe him an open mind and a chance to lead.” n Bob Bauman is a former U.S. Congressman from Maryland. He is an author and lecturer on wealth protection, offshore residence and second citizenship. Email Bob at [email protected] December 2016
n Ted's Tips
Know Your 2017 Tax Obligation
T
AX time is soon upon us. As I always recommend, one thing to do without fail is to make all your eligible retirement contributions, which you can do for tax year 2016 up to April 30, 2017.
This year’s (2016) tax brackets and retirement contribution levels can be found in the December 2015 edition of The Bauman Letter. For your convenience, below are the 2017 figures.
2017 TAX BRACKETS & TAX RATES Rate Single Filers Married Joint Filers
Head of Household Filers
Married Filing Separately
10%
$0 to $9,325
$0 to $18,650
$0 to $13,350
$0 to $9,325
15%
$9,326 to $37,950
$18,650 to $75,900
$13,351 to $50,800
$9,326 to $37,950
25%
$37,951 to $91,900
$75,901 to $153,100
$50,801 to $131,200
$37,951 to $76,550
28%
$91,901 to $191,650
$153,101 to $233,350
$131,201 to $212,500
$76,551 to $116,675
33%
$191,151 to $416,700
$233,351 to $416,700
$212,501 to $416,700
$116,676 to $208,650
35%
$416,701 to $418,400
$416,701 to $470,700
$416,701 to $444,500
$208,651 to $235,350
39.60%
$418,401 or more
$470,701 or more
$444,501 or more
$235,351 or more
2017 RETIREMENT CONTRIBUTION LEVELS Max Annual Plan Contribution Plan 401(k) Pretax $18,000 SIMPLE IRA & Solo 401(k) Catch-Up
Max Annual Contribution $3,000
401(k) After-Tax
$54,000
IRA (Traditional)
$5,500
401(k) Catch-Up (50 or Older)
$6,000
IRA (Roth)
$5,500
SEP IRA
$54,000
IRA Catch-Up
$1,000
SIMPLE IRA & Solo 401(k)
$12,500
Defined Benefit Plan
$215,000
December 2016
14 www.sovereignsociety.com
Note that the above limits: • Apply to all your retirement plans cumulatively • Do not apply to rollovers Tax deductibility of IRA contributions ends at a modified adjusted gross income of… • Unlimited if both spouses are ineligible for an employer retirement plan. • $184,000 if one spouse is eligible for an employer plan.
• Foreign Account Tax Compliance Act (FATCA) filing kicks in at aggregate foreign assets of $200,000 on the last day of the year or $300,000 at any time during the year for singles, and aggregate foreign assets of $400,000 on the last day of the year or $600,000 at any time during the year for joint filers. • Foreign Bank Account Report (FBAR) filing is required if your aggregate non-U.S. financial accounts total over $10,000 at any point during the year. n
• $119,000 if both spouses are eligible for an employer plan. For nonresident citizens of the U.S.: • The Foreign Earned Income Exclusion for 2017 will be $102,100 for singles and $204,200 for couples filing jointly.
I’m interested in hearing more from you. What is your No.1 concern when it comes to your assets and your freedom? Send your comments to me at [email protected]
All international and domestic rights reserved, protected by copyright laws of the United States and international treaties. No part of this publication may be reproduced in any form, printed or electronic or on the worldwide web, without written permission from the publisher, Sovereign Offshore Services, LLC. P.O. Box 8378, Delray Beach, FL 33482 USA. Legal Notice: This work is based on what we’ve learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It’s your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments such as futures, options, and currency trading carry large potential rewards but also large potential risk. Don’t trade in these markets with money you can’t afford to lose. Sovereign Offshore Services LLC expressly forbids its writers from having a financial interest in their own securities or commodities recommendations to readers. Such recommendations may be traded, however, by other editors, Sovereign Offshore Services LLC, its affiliated entities, employees, and agents, but only after waiting 24 hours after an internet broadcast or 72 hours after a publication only circulated through the mail. (c) 2016 Sovereign Offshore Services LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Sovereign Offshore Services, LLC. P.O. Box 8378, Delray Beach, FL 33482 USA.
www.sovereignsociety.com 15
December 2016
n Final Thoughts
The Last Word
I
’VE always liked philosophy. I think it has to do
media assess them. Instead, they pick and choose
with my natural curiosity, skepticism and hostility
interpretations based on how it serves their agenda —
to authority. Something inside me believes that even though my body can be dominated, my mind can never be conquered. But what is truth? Philosophers never get tired of this question. On one hand, there are those like René Descartes, of “I think, therefore I am” fame, who believed that we can deduce the ultimate nature of reality mentally,
how it fits into their preferred “narrative.” Those with a small-government agenda choose interpretations that say inflation is higher than it’s reported to be, because they want government to stop printing money. By contrast, pro-government types latch onto interpretations that say “true” inflation is lower, because they want the government to carry on. The critical word here is “because.” The average
from first principles, without regard to the physical
person’s likelihood of believing one interpretation of
world around us.
something like inflation over another depends almost
On the other are “empiricists” like John Locke,
entirely on whether that interpretation supports what
who insist that we can only understand truth through
they’d like to see happening in the world. As such,
continuous engagement with the physical world.
“truth” has come to be defined by what people want
I fall in between. I accept that the physical world is the only source of “truth,” in the narrow sense of
to believe. The result is a world without facts, only opinions.
things that cannot be falsified. A dense stone thrown
Politicians and media moguls have ruthlessly
into a lake sinks every time, no matter how many
exploited and encouraged this. They flourish in a
philosophical arguments I generate to stop it from
society where people will believe anything as long as
doing so.
it fits their prejudices.
But I also accept that sinking-stone type truth is
But a society can only indulge in this kind
insufficient to operate successfully in the world. We
of nonsense if it can afford to do so … if the
also need concepts (like “density”) that only exist in
consequences of ignoring reality don’t hurt them too
our minds — concepts that “stand for” something
much. But what happens when we can’t afford to be
that must be real even though we can’t actually see it.
that blasé about truth anymore?
Why am I telling you this? Because the single biggest problem confronting ordinary Americans is the growing distance between truth and the way it is represented to us by politicians and the media. Consider, for example, the humble inflation rate. I’m certain there is a number that represents the actual rate of rise of prices in the economy, properly weighted. But nobody can agree on what it is. People write thousands of words daily about why the “official” inflation rate is wrong for one reason or
Ever pithy, Upton Sinclair put it this way: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” If you turn that maxim on its head, it says: “A man without a salary can’t afford not to understand things.” I suspect the United States is fast approaching a time when we can no longer afford to indulge our distaste for the truth. Who will we believe then? Kind regards,
another. The problem is that some of the people who think the official inflation rate is wrong are closer to the truth than others. But that’s not how politicians and December 2016
Ted Bauman, Editor 16 www.sovereignsociety.com
Bauman Letter — Your Guide to Rogue Freedom & Bold Prosperity —
Ditch That 401(k) and Take Control of Your Retirement
H
IS proud face, weathered by years of honest
candidate’s promises, the new administration was
work, betrayed his true feelings.
already discussing plans to eliminate Social Security and Medicare. The Speaker of the House had just
He’d worked as a senior manager for the
announced his intention to do so by 2020, and the
company for all his adult life. He’d paid into its
new president’s appointees for the Social Security
pension scheme, and then into its 401(k) plan when it
Administration were all known supporters of that
was converted in the 1990s. That, plus shares in the
goal.
company itself, constituted his entire financial future when he retired.
“McDonald’s, here I come,” he thought bitterly. And not just for the cheap meals … he’d probably
But all that preparation meant nothing when his
end up flipping burgers until he could no longer lift a
ex-employer went bankrupt and the administrators of
spatula.
his 401(k) plan deprioritized it. They were no longer receiving fresh contributions from the company or its
The worst thing about it was he had had options …
now-unemployed workers and management.
options that he could have taken, but didn’t.
A combination of inattention, poor investment
Now it was too late.
choices and high fees cut his prospective retirement earnings in half. The biggest hit came when the
Take Charge of Your Money
value of U.S. Treasurys tanked when a new president
If you’re leaving a job that came with a 401(k), or if
announced plans to renegotiate U.S. public debt.
you’re still working for the same employer and you’re
And of course, his company share holdings were
already older than 59½, you have a choice to make.
now worthless.
The same goes for 403(b) plans, government 457(b)
To make matters worse, one day he woke up
plans, military retirement plans and all other types of
to the post-election news that, despite all the
qualified retirement plans.
Inside This Issue 10 | New Zealand Vault Expands Its .
11 | Wealth Protection
Capacity for Bullion Storage
North of the Boarder
13 | America’s Vital Continuity
By John Mulvey
By Andy Schectman
www.sovereignsociety.com
By Bob Bauman JD December 2016
You can choose to risk your future by leaving your
Why I Hate 401(k)s — and You Should Too
money in someone else’s hands or take charge of your future yourself.
Your main retirement vehicle wasn’t meant to be
You can leave the 401(k) as it is, if your ex-
a 401(k) plan; they aren’t designed that way. As a
employer lets you. But think about the risk.
result, I and many other commentators agree that,
You’ll no longer have a company HR team to help
overall, 401(k)s have been a failure.
you with plan questions.
To begin with, the 401(k) plan was never meant to
You may be charged higher 401(k) fees as an ex-
be a mainstream pension plan. It was envisaged as
employee.
a voluntary program intended to supplement other retirement savings.
You won’t be able to make additional contributions.
In fact, the 401(k) account came into being by
Above all, you have no control over how your
accident, as a clause in the Revenue Act of 1978. The
retirement kitty is being invested.
clause said employees could choose to defer some
Or you could cash out. Bad idea! It sabotages your
compensation until retirement, and they would not
retirement and comes with huge penalties and taxes
be taxed until that time. (Companies had long offered
levied by the IRS. You’ll pay a 10% early withdrawal
deferred compensation arrangements, but employers
fee, plus ordinary income taxes on the amount
and the IRS had been going back and forth about their
distributed.
tax treatment.)
That means you might hand over up to 40% of
But a benefits consultant named Ted Benna
your accumulated 401(k) money right off the top.
realized the 401(k) provision could be used as a retirement savings vehicle for all employees.
But there’s a third option: a 401(k) rollover. This option allows you to transfer your balance
In 1981, the IRS clarified that 401(k) plan
into another retirement account that you can control
participants could defer regular wages, not just
— like a self-directed IRA — while keeping the
bonuses, and 401(k) plans began to proliferate.
money tax-deferred.
By 1985, there were 30,000 401(k) plans in existence. Ten years later, that figure topped 200,000.
In this report, I’m going to show you how to do it …
By 2013, there were 638,000 plans in place with 89
and why you must do so now if you can.
million participants. Assets in 401(k)s totaled $4.8
About Ted Bauman
trillion as of March 2016. The reasons for the shift are complex, but the main
Ted Bauman is the editor of the Plan B Club, a blueprint to help protect your wealth and escape excessive taxation, regulations and wealth confiscation in America. He is also the editor of The Bauman Letter, a newsletter that’s brimming with up-to-the-minute asset protection strategies, tips on buying and investing in real estate abroad, and retirement and residency secrets in American-friendly countries around the globe. Ted has been published in a variety of international journals, including the Journal of Microfinance, Small Enterprise Development and Environment and Urbanization. Email Ted your thoughts and questions at [email protected]
ones are that workers overestimated the prospect of amassing retirement wealth with a 401(k). The second is that employers found that providing a 401(k) plan cost them less … and they could pass those hidden costs on to employees. But there’s another less understood reason. For the most part, 401(k) administrators offer plan holders investment options that focus on funds from which they get a “kickback” of some sort. It’s hard to quantify the hidden opportunity costs of those self-interested choices — what you lose
December 2016
2
www.sovereignsociety.com
by being forced to use a plan provider’s proprietary
showed that an additional 1% in fees over a 30-year
funds with lower returns instead of more efficient
investment can reduce a plan’s final value by as much
investment vehicles.
as half. A worker who makes $75,000 per year and saves 8% of that annually in a 401(k) would lose 2.8
For example, did you know a price war in
years’ worth of savings in a target-date fund with a
exchange-traded funds (ETFs) has been going on recently? Many basic index ETFs are offered
0.2% fee and 11.6 years in one with a 1% fee, over the
at no
course of a career.
commission and are among the lowest-cost funds on
Think of that: 11.6 years of your life eaten up in
the planet. Those options rarely turn up in a 401(k).
fees.
Indeed, compared with other retirement accounts,
But the reality is even worse: The average cost you
such as IRAs or taxable brokerage accounts, 401(k) s have far fewer investment options. You’re usually
pay for a work-sponsored 401(k) plan today is about
stuck with the basic asset classes of cash, bonds and
1.44% a year of total assets invested.
stocks. No ETFs, commodities, currencies or emerging
By contrast, even a simple ETF-centered IRA costs
market funds.
approximately half as much — 75 basis points, or $75 for every $10,000 invested.
Even within these limited options, most owners of 401(k)s also turn out to be poor investors, since the
Things may be about to get much worse.
infrastructure for managing them is so poor. They
Earlier this year, Department of Labor regulations
make mistakes like selling low and buying high or shying away from optimal asset classes at the wrong
went into effect requiring plan providers to disclose
time.
the amount in fees that both companies and their employees pay for their 401(k) plans.
Folks who’ve studied the effect of investment
That rule may be slated for extinction by the
choices on 401(k) savers have found that a retirement income shortfall is more likely when 401(k) owners
incoming Trump administration, which is already
choose their own asset class allocation. If they can
packed with fee-loving Wall Street insiders.
also choose their stock investments, the odds of a
The result of all these shortcomings in 401(k)s?
shortfall rise further.
About 60% of American households were at risk of
Fees are another big problem.
being unable to maintain their standard of living as
Many hidden parties take an administrative fee
of 2013, a figure barely changed from a year earlier —
from your 401(k). There is the custodian, who charges
even though a strong bull market should have pushed
a fee to hold the assets; the reporting firm that
savings higher, and the government gives up billions
generates regular statements showing the assets’
in tax revenue to subsidize the plans.
performance; and the plan manager who either
Roll Over and Play the Markets Yourself
charges a flat fee to the employer or a percentage of the total assets to the employee. A fund’s “expense ratio” can encompass
There’s nothing stopping you from getting off the
everything from marketing fees paid to the
401(k) gravy train … a train from which someone else
investment firm to commissions paid to the broker
eats the gravy.
who recommends specific funds.
Most people know that if you take an early
One analyst who has studied the matter concludes
distribution from a 401(k) (or an IRA), you must
that “as a result of high fees, fund balances in 401(k)
include it in your gross taxable income for that
plans are about 20% less than they could be.”
year, pay tax on that income and pay a 10% early
A study by retail investment behemoth Vanguard www.sovereignsociety.com
withdrawal penalty tax. 3
December 2016
However, there is nothing stopping you from
If you had three IRAs, for example, you’d have to
transferring money from one retirement vehicle to
roll them over one at a time over a three-year period.
another — a “rollover.”
But fortunately, the same ruling said the one-peryear limit doesn’t apply to rollovers from traditional
Done the right way, you can move your entire retirement kitty out of the hands of unaccountable,
IRAs to Roth IRAs (i.e., conversions), trustee-to-
high-fee plan administrators and into a retirement
trustee transfers to another IRA — or for 401(k) plan-
vehicle that allows you to invest yourself … even to
to-IRA rollovers.
invest abroad and outside the vulnerable U.S. dollar.
That means that if you have multiple 401(k)s from previous employers, you can consolidate them into a
There are two basic types of rollovers:
single self-directed IRA all at once.
1. Direct and trustee-to-trustee rollovers: This
On top of that, another recent IRA rule allows you
is where you ask your current retirement plan administrator to transfer funds directly to another
to transfer any extra post-tax contributions you’ve
IRA, or issue you a check or checks made payable to
made to a 401(k) tax-free.
your new account. No taxes are withheld from your
That’s a huge advantage. It gets around the income
transfer amount in this instance.
and contribution limits to Roth IRAs. It means you
2. The 60-day rollover: You can have a distribution
can contribute up to $58,000 a year of after-tax
from an existing retirement plan paid directly to
income to a 401(k), safe in the knowledge that you
you. If you deposit all or a portion of it in an IRA or
can add it to a Roth IRA in the future.
a retirement plan within 60 days, it isn’t counted as
Finally, another new rule says there is no income
a withdrawal, and you ultimately won’t pay taxes or
limit on converting a 401(k) to a Roth. Before 2010,
penalties. However, your employer must withhold
you could not make the switch if your adjusted gross
20% of the rolled-over amount for the IRS, even if
income was more than $100,000, whether married or
you indicate that you intend to roll it over into an IRA
single.
within 60 days.
The SD-IRA: Your Ticket to Control
You’ll have to come up with the 20% that was withheld when you set up a new IRA — if you don’t, that portion will be considered a distribution, and
Back in May 2015, I wrote a report on the best IRA
you will also owe a 10% penalty on that money if you
option there is … the self-directed IRA (SD-IRA). If
are under age 59½. When you file your income tax
you haven’t already read it, I encourage you to do so
return, however, you will receive credit for the 20%
ASAP.
withheld by your employer.
There’s about $17.5 trillion in all U.S. private
Several recent changes to IRS rules make rollovers
retirement plans. More than 25% of it is in personal
like these easier and more attractive than ever.
IRAs. For a clever few, some of that money is in SD-
For many years, you couldn’t make more than one
IRAs … about 2% of the total.
rollover from the same retirement plan within a one-
But that total is growing, as folks find that a more
year period, or a rollover from the new IRA into which
flexible approach to retirement planning provides the
the distribution was dispersed. But you could roll over
best returns and asset protection.
from multiple IRAs into a new one.
An SD-IRA is a critical tool in these troubled
Then, beginning January 1, 2015, the IRS ruled that
times. It’s legal, profitable and can be as simple or as
you can make only one rollover from any IRA to a new
complex as you’d like it to be.
IRA in any 12-month period, regardless of the number
Best of all, it can open offshore opportunities for
of IRAs you own. December 2016
4
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your retirement investments that are unavailable in
An SD-IRA allows you to invest in things like
any 401(k).
real estate, including residential and commercial properties, farmland and raw land — both U.S. and
In most respects, an SD-IRA is just like a
foreign. You can invest in private companies or fund
conventional IRA. You can have multiple IRAs, so
a startup business or other venture. This is especially
an SD-IRA can coexist with others. Capital gains,
attractive if the startup does well: Your IRA’s value
dividends and interest earnings within the account
will increase along with the fair market value of the
incur no tax liability. Contributions are tax-deductible
company.
if it’s a traditional IRA. Distributions are taxed as ordinary income and can begin when you turn 59½ or
An SD-IRA can make private loans. It can invest
if you become disabled.
in any area where you might have expertise. You could direct parts of your SD-IRA into currencies,
You can withdraw funds for qualified unreimbursed
commodities, hedge funds, commercial paper, royalty
medical expenses that are more than 7.5% of your
rights, intellectual property or equipment and leases,
adjusted gross income (AGI), or for qualified higher
mineral rights … or even golf courses and race horses.
education expenses for yourself, your children and grandchildren. When you die, your spouse can roll
And you can invest in gold bullion or other precious
both of your IRA accounts into one IRA account.
metals. Of course, it’s all tax-deferred for a traditional SDIRA, or with tax-free appreciation and withdrawals if you choose a Roth SD-IRA.
About 60% of American households were at risk of being unable to maintain their standard of living as of 2013, a figure barely changed from a year earlier — even though a strong bull market should have pushed savings higher, and the government gives up billions in tax revenue to subsidize the plans.
And if you like, you can do some or all of it outside
the U.S. and the U.S. dollar.
Roth or Traditional? OK. Let’s say I’ve convinced you to roll your 401(k) over to an SD-IRA. Roth or traditional? In February this year, I wrote a report about your IRA options. Here’s a quick recap. Both traditional and Roth IRAs allow you to contribute “earned” income — i.e., salary or wages, even if from your own business — into a taxsheltered retirement account that can be invested in a variety of ways. (“Unearned” or “passive” income from investments, rentals, inheritance, insurance
The big difference is that with an SD-IRA, a
payouts, pensions and government benefits isn’t tax-
specialist IRA “custodian” permits you to actively
deductible when paid into to an IRA.)
choose and design investments far beyond everyday
The defining feature of each type of IRA is its tax
stocks, bonds and mutual funds. You can invest in real
treatment:
estate, private mortgages, private equity, precious metals, intellectual property ... and much more.
• Traditional IRA: You receive a tax deduction now — i.e., reduce your current income for tax
You can reap incredible gains, tax-free, on both the income from your investments and their underlying
purposes — for the contributions you make.
appreciation … gains that go way beyond what a
Your money then grows tax-deferred, meaning
conventional IRA custodian can provide.
you don’t have to pay taxes until you begin
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5
December 2016
withdrawing from the account later, when you
1. Growth and withdrawals are tax-free. You
will be taxed at your marginal rate at that time.
contribute after-tax dollars to a Roth IRA. They can’t be taxed twice. Moreover, any earnings from the
• Roth IRA: There is no tax deduction for your
investments in the account — and therefore money
contribution — you pay into the account with
you take out in retirement — is free from federal
after-tax earnings. However, the money grows
taxes (and usually state and local taxes too) with one
tax-free, so when it’s time to withdraw the
condition: Withdrawals from Roth IRAs are income
money, you don’t have to pay taxes on any of
tax- and penalty-free if the first withdrawal is made
it, including the investment earnings on your
after a five-year period beginning with the first
original contributions.
taxable year a Roth IRA contribution was made.
The simple rule of thumb is that if you can afford it,
This restriction doesn’t apply, however, if the Roth
and if you are eligible, a Roth IRA makes more sense if
owner is age 59½ or older, disabled or deceased.
you think income taxes are going up in the future.
And you can take out $10,000 tax- and penalty-
Now, I realize most people think taxes are going
free if you’re a “first-time homebuyer” (i.e., you
to fall in the next few years under a Republican
haven’t owned a house for at least 24 months) of a
president, House and Senate. They probably will. But
principal residence for yourself, your spouse or your
current plans will raise the already-grotesque federal
descendants.
deficit by as much as $11 trillion.
2. There are no required minimum distributions
That suggests two scenarios.
(RMD) during the lifetime of the original owner. Traditional IRAs (and, generally, 401(k), 403(b) and
First, the Democrats could reclaim the government in 2020 — which is entirely possible if Republicans
other employer-sponsored retirement savings plans)
push ahead with plans to abolish Social Security and
require you to take money out. If you don’t need your
Medicare. Democrats will raise taxes in a desperate
distributions for essential expenses, RMDs can be
attempt to pay down the deficit.
a nuisance — or worse, force you into a higher tax bracket. If you miss taking one, there could be a big
Second, the GOP could hold on to Washington for
penalty: 50% of the RMD.
the next eight years. History shows that one party hardly ever holds the White house for longer than
3. Leave tax-free money to heirs. A Roth SD-IRA
that. That means taxes will go up from 2024.
can have legacy and estate-planning benefits. For instance, if you’re planning to leave your retirement
But there are other things to worry about.
savings to your heirs, it will affect their taxes. RMDs
The higher federal deficits and protectionist policies
from inherited traditional IRAs constitute taxable
promised by the incoming Trump administration will
income for heirs, often during their peak earning
rapidly undermine the U.S. dollar. They will also lead
years, which could push them into a higher marginal
to inflation and slower growth, as the global economy
tax bracket.
contracts in an era of reduced trade.
Even though RMDs are required for Roth IRAs that
If your retirement kitty is concentrated in dollar-
have been passed on to heirs, those distributions
denominated assets, you are going to lose both ways
remain tax-free and don’t push up your heirs’ taxable
— eventual higher taxes and less purchasing power
income. Moreover, because Roth IRAs don’t require
for your retirement dollars.
RMDs during your lifetime, they can grow larger for your heirs than a traditional IRA.
To me, all this clearly points to a Roth SD-IRA.
Best of all, because you pay income taxes up front,
Of course, there are other advantages to a Roth SDIRA than just defense against inevitable tax increases.
a Roth IRA can help reduce the size of your taxable
Let’s consider the main ones:
estate, since it isn’t included in that calculation.
December 2016
6
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4. Have tax flexibility in retirement. Mixing how
Estate tax (if any) won’t apply at the time of transfer.
you take withdrawals between your traditional IRAs,
Note that if a non-spouse inherits a Roth SD-IRA,
401(k)s or other qualified accounts, and Roth IRAs
he or she cannot combine the Roth SD-IRA with his
allows you to fine-tune your overall income-tax
or her own, cannot make additional contributions
liability in retirement. For example, you could take
and must make RMDs. Moreover, if the Roth IRA is
withdrawals from a traditional IRA up to the top of
less than five years old, income tax may apply to
that year’s tax bracket, and then take any money you
distributions to the non-spouse and estate tax (if any)
need above that bracket from a Roth IRA, tax-free.
will apply.
5. Help reduce or avoid the Medicare surtax. A Roth
Do You Stand to Benefit? Yes!
IRA may help limit your exposure to the Medicare surtax on net investment income. This is because
A while back, Fidelity Investments conducted
qualified withdrawals from a Roth IRA don’t count
a survey that revealed that more than half the
toward the modified adjusted gross income (MAGI)
respondents didn’t know they could roll over the
threshold that determines the surtax.
assets in a 401(k) account directly into a Roth IRA.
RMDs from a traditional IRA are included in the
Only one-fourth of the respondents said they had
MAGI and do not count toward the MAGI threshold
ever considered rolling 401(k) assets from a former
for the surtax. And unlike distributions from a
employer to a Roth. Yet, after they were told about the
traditional IRA, qualified Roth distributions do not
benefits of a Roth IRA, nearly 60% said they would
affect the calculation of taxable Social Security
like to so.
benefits.
For good reason! Let’s consider some cases where
6. Use your contributions at any time. A Roth IRA
rolling over your 401(k) to a Roth SD-IRA would make
enables you to take out 100% of your contributions
sense.
at any time and for any reason, with no taxes or penalties. After all, you’ve already paid taxes on them.
• If you’re a high-income earner who’s been
If you withdraw investment earnings from a Roth
phased out of contributing to a Roth, you are
IRA within the five-year period I mentioned above,
now able to get into a Roth IRA with ultimately
you’ll pay tax on that, but generally, withdrawals
no out-of-pocket costs. For instance, in tax
are considered to come from contributions first.
year 2016, you cannot make a full contribution
Distributions from earnings begin only when all
to a Roth IRA if your individual income is more
contributions have been withdrawn.
than $117,000, or if your joint income is more than $184,000. Contribution limits for IRAs are
7. You can continue to contribute as long as you
$5,500 a year, plus an extra $1,000 if you’re 50
work. If you have earned compensation, whether it
or older. That pales in comparison with 401(k)
is a regular paycheck or 1099 income for contract
limits.
work, you can contribute to a Roth SD-IRA, no matter how old you are. There is no age requirement for
• If you made after-tax contributions to
contributions, as there is for a traditional IRA, where
traditional 401(k) plans throughout the 1980s
you cannot contribute if you are older than age 70½,
and 1990s, before the advent of the Roth IRA
even if you have earned income.
and Roth 401(k).
8. Combine your Roth with your spouse’s in your
• If you want to build up a Roth SD-IRA with the
will. Your spouse can be the sole beneficiary of your
goal of passing it on to your heirs. You can roll
Roth SD-IRA, while also owning a separate Roth IRA.
the after-tax funds into a Roth SD-IRA, so they
He or she can then combine the two Roth IRAs into a
will not be required to take required minimum
single plan without penalties, making contributions
distributions during their lifetime. That leaves a
and otherwise controlling the account as usual.
bigger pile of money for heirs.
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7
December 2016
• If you’ve already make the maximum
Rolling Over Your 401(k) to an SD-IRA
contribution to all your tax-advantaged retirement accounts and simply want to save
If you want to take my advice and roll over
more.
an entire 401(k) balance to an IRA, the rules are
• If you’ve delayed saving for retirement and
straightforward.
need to save more than standard 401(k) and IRA
For a traditional 401(k) or IRA, the plan
limits currently allow.
administrator will distribute the funds to you in
• After you reach age 70½, you’re required to
two separate checks — one representing all your
take minimum required distributions from a
pretax contributions, the other for any after-tax
401(k), 403(b) or traditional IRA every year,
contributions you may have made over the years. You
even if you’re still working. If you plan to work
will then deposit those into a new Roth SD-IRA.
after age 70½, rolling over into a Roth SD-IRA
Partial distributions of a 401(k) balance, on the
allows you to defer taking distributions.
other hand, are trickier.
As I said above, Roth IRAs stand alone as the
For example, let’s say you have $1 million
tax-sheltered retirement plan that does not
in a 401(k), with $800,000 coming from pretax
require RMDs. That will allow you to continue
contributions and $200,000 coming from after-tax
accumulating money in your Roth IRA while you
contributions.
are forced to draw down the balances of other retirement accounts. It makes it far less likely
Unfortunately, you can’t “isolate” the after-tax portion of your 401(k) and roll just that portion over
that you’ll ever outlive your money.
RETIREMENT PLAN CONVERSION CHART TO Roth Qual. 401(k) Roth Trad. Simple SEP- Gov. Plan 403(b) 403(b) IRA IRA IRA IRA 457(b) (pre-tax) (pre-tax) 457(b) Roth IRA
Yes
No
No
Trad. After IRA Yes Yes 2 years
FROM
Simple IRA
After After 2 years 2 years Yes
No
No
No
No
No
Yes
Yes
Yes
Yes
No
After After After After 2 years 2 years 2 years 2 years No
SEP- After IRA Yes Yes 2 years
Yes
Yes
Yes
Yes
No
Gov. 457(b)
Yes Yes
After 2 years
Yes
Yes
Yes
Yes
Yes
Qual. Plan (pre-tax)
Yes Yes
After 2 years
Yes
Yes
Yes
Yes
Yes
403(b) (pre-tax) Yes Yes
After 2 years
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
Yes
Roth (401(k), 403(b), 457(b) December 2016
Yes
No
8
www.sovereignsociety.com
to a new IRA. As per my example, you can’t take a
an SD-IRA allows you to move some or all of your
distribution of $200,000, claim the entire amount
IRA assets into foreign assets, and above all … assets
consists of after-tax contributions, and roll it into an
denominated in currencies other than the U.S. dollar.
SD-IRA.
To me, that is the most important thing of all. We
Instead, you must obey the conversion “pro-
tend to focus our fears of the future on confiscation
rata rule.” It forces you to roll over a proportionate
of our wealth by the government. But I don’t think
amount of both pretax and after-tax funds relative to
that’s the biggest threat.
the value of the entire account.
If our government were to confiscate gold … our national creditors feared nationalization of assets …
For example, if your 401(k) account is made up of 80% pretax funds and 20% after-tax funds, a
as has happened in places like Venezuela … the U.S.
$200,000 partial distribution must be split into a
economy would rapidly collapse.
$160,000 pretax portion and $40,000 after-tax
In the event of that kind of confiscation, dollars
portion. The only way to roll over all the after-tax
and U.S. Treasurys would be dumped so fast that
portion of your 401(k) into an SD-IRA is to roll over
interest rates would go double digit overnight. Above
the entire 401(k) account, not just part of it.
all, the dollar would fall precipitously.
What about the actual process? As with most things
If the dollar dives as badly as I think it will
related to tax, there’s a right way … and a wrong way.
eventually, I believe we face the real prospect of currency controls. If your retirement assets are stuck
For example, you don’t want the 401(k) administrators to cut a check in your name. That
in the U.S. and denominated in U.S. dollars, you are
counts as a distribution, and you may lose up to one-
stuck.
third of your balance to taxes and penalties.
But if you’ve got an SD-IRA invested in offshore assets and other currencies … you are free as a bird.
Here’s the four-step process for how to roll over a 401(k) into an IRA. As with any big decision, it’s
Which would you rather be?
always good to know your options before you go all in, so let’s start there.
Contacts
1. Decide on a Roth or a traditional IRA. If you roll into
There are many potential custodians who
a Roth IRA, you’ll owe taxes on the rolled amount.
specialize in self-directed IRAs. I like NuView IRA.
2. Open a rollover SD-IRA account with a good
They impress me with the range of options available,
custodian like the one I recommend at the end of this
including real estate, precious metals and even more
report.
exotic and profitable options like tax liens. They can
3. Instruct your current 401(k) plan disintegrator
be contacted as follows:
to do a “direct rollover.” These two words are
NuView IRA
important: They mean that the 401(k) plan will
Tyler Carter
transfer funds directly to your new SD-IRA account,
Director, Business Development
not to you personally.
[email protected] www.nuviewira.com
4. Start investing your way.
Tel: +1-877-259-3256
Conclusion —Preparing for the Hidden Danger
One of the attractions of NuView is their rate schedule. They charge just $50 to open an account. It costs $95 to fund an entity such as an LLC through
I want to finish off with a few observations on
the IRA, $50 for international wire fees and $295 as
the “offshore” aspect of SD-IRAs. As I said above, www.sovereignsociety.com
an annual maintenance fee for the account. n 9
December 2016
n Forbidden Knowledge
New Zealand Vault Expands Its Capacity for Bullion Storage By John Mulvey
I
N the August 2016 edition of The Bauman Letter, Ted Bauman wrote about how you can easily open a safe-deposit box in New Zealand online, then purchase bullion and have it deposited in your box by international accountancy firm Grant Thornton acting as your agent.
Best of all, the specific system created by New Zealand Vault makes your bullion holdings nonreportable to the U.S. government under present laws. Those of you who attended the Total Wealth Symposium conference in Bermuda this year may have met me — John Mulvey, CEO and owner of New Zealand Vault. While there have been several owners, New Zealand Vault has been operating since 1931. It is privately owned, independent of the government and the New Zealand banking system, making it the ideal choice for storing precious metals safely and securely. In geographic terms, you can’t get much farther away from the U.S. than New Zealand. But this isolation is one of its greatest assets. New Zealand is an island nation in the South Pacific, with a land mass like that of the United Kingdom. It has a developed economy, is politically stable, and has a respected judiciary system and one of the soundest banking systems in the world. In many surveys, it is considered the least corrupt country in the world. As Ted reported in August, New Zealand Vault has developed an innovative and simple solution for opening a safe-deposit box and purchasing bullion online. You can control access to your box for buying and depositing bullion and selling it if the need December 2016
arises through international accountancy firm Grant Thornton. They will hold your key in their safe custody and only act on your written instructions. In response to booming demand, New Zealand Vault is happy to announce a second treasury-grade vault in Wellington that will sit alongside the existing safe-deposit vault. This new facility will be set up specifically for institutional bullion investors, wealth-management businesses, wholesalers and family offices. Bullion will be stored in a series of large, high-end safes enclosed in the new vault. In addition, the new vault will contain a further 1,200 safe-deposit boxes for individual retail clients. The vault will be fitted with the most sophisticated multilevel electronic protection available, complete with 24/7 active monitoring. The existing partnership with Grant Thornton will also extend to the new vault, ensuring the utmost privacy and security levels for clients is maintained. In addition, New Zealand Vault has employed a marketing director to assist offshore clients — Kirsten Clark — and is in the process of recruiting additional staff to ensure the exceptional customer service for which New Zealand Vault is well-known. The new vault is scheduled to open early 2017, but in the meantime, boxes are still available within our existing Wellington and Auckland vaults. If you are interested in buying or storing bullion in a safe-deposit box, New Zealand Vault has a very simple process that can be done online by visiting www. nzvault.com. Alternatively, you can email support@ nzvault.com or call +64-4-915-1168. n John Mulvey is the Managing Director and owner of New Zealand Vault Limited. John was a former senior executive from the banking sector and established business 10 www.sovereignsociety.com
n Unfiltered Insider
Wealth Protection North of the Border By Andy Schectman
I
’VE had a long association with The Sovereign Society and have been good friends with Bob Bauman for years. I was thrilled when his son Ted started writing The Bauman Letter. The other day, I was chatting to him about the great increase in the number of readers lately … which made me realize that many of you may not know about my firm, Miles Franklin Ltd.
Protect Your Bullion in Canada Miles Franklin is an unusual gold and silver bullion coin company. We have yielded positive results for clients since 1989. My father, Andrew Schectman, and I founded it. Our vision was to offer a wide variety of bullion and numismatic products, extensive broker expertise and fair pricing. But we also provide secure bullion storage. When you purchase gold and silver from us, you are offered the option of storing your purchase in Toronto, Montreal or Vancouver, utilizing our strategic alliance with Brink’s International. Of course, you can also store your own existing bullion with us and send us more at any time. Our one-of-a-kind private safe-deposit box program in Toronto and Vancouver allows you to store gold or platinum — even U.S. dollars, Canadian dollars or Swiss Francs — in a private, insured safe-deposit box completely outside of the banking system. We’re also finicky about security and transparency. Because we are so dedicated to making this program the “gold standard” of offshore storage alternatives, Miles Franklin’s senior management accompanies our www.sovereignsociety.com 11
auditors on their diligent audits performed several times each year. Above all, unlike the industry standard of charging a percentage of bullion value, we fix your storage cost on a per ounce basis. In other words, if gold prices double, your storage costs remain constant.
Your Key to Wealth Protection Today I’d like to tell you about a new, one-of-a-kind segregated storage program we recently launched. We’ve spent more than a year creating a unique storage
Our one-of-a-kind private safe-deposit box program in Toronto and Vancouver allows you to store gold or platinum — even U.S. dollars, Canadian dollars or Swiss Francs — in a private, insured safe-deposit box completely outside of the banking system.
feature — again, with Brink’s Canada. The key feature is that while Miles Franklin and Brink’s are aware of the contents of your storage for auditing purposes, only you have the key. If you want to make a deposit, take a withdrawal or simply view your box’s contents, the only way it can be opened is if you go in person — or mail Brink’s the key with express written instructions, after which Brink’s will mail the key back to you. Here’s how it works. Your bullion — or other items December 2016
n Unfiltered Insider
— are counted and verified on camera, then sealed in a safe-deposit box and locked with a Brink’s seal. The seal number tab snaps into two pieces. You will receive the break-off tab from the seal on the box along with keys and a Brink’s inventory certificate signed by a Brink’s authorized employee, including handwriting the seal number on the certificate to ensure no tampering has occurred. The key, tab and certificate are then sealed in a Brink’s bag to ensure that it is tamperproof. The sealed Brink’s bag is now sent to you via UPS. If you wish to add to or withdraw from your storage box, you’ll ship your key to Brink’s Vancouver or Toronto directly — after you’ve sent the requisite paperwork to Miles Franklin in advance. We’ll coordinate a shipment on our UPS account by emailing you a UPS airway bill, which will include the complete address details for the package to be shipped to the vault manager at Brink’s Vancouver or Toronto. You can use any UPS drop-off box or UPS center. After your box has been opened and resealed, you
will receive your key back, including a new Brink’s seal and certificate in a bag each time. Whenever you want to reclaim possession of your precious metals, you’ll send the key as above. We’ll then move the bullion to our warehouse in Fargo, North Dakota, from which we will ship anywhere in the U.S. via UPS or U.S. Post Office insured. Given the increasing amount of political, monetary and legal risks the world faces, we believe this unique product is the perfect supplement to our current industry-leading segregated storage program. n Prior to starting Miles Franklin Ltd. in 1989, Andrew became a licensed financial planner, specializing in Swiss franc investments and alternative investments. At Miles Franklin Ltd., a company that has eclipsed $5 billion in sales, Andrew has developed an operation that maintains trust, collaboration, ethical behavior, and superior customer service and satisfaction to better serve their clients. He is responsible for overseeing the firm’s operations and business functions; including strategy and planning, account management, finance and new business.
Join Us in Uruguay March 2017!
U.S.A.
Feel the freedom to total wealth
March 27 – 30. South America
Uruguay
We’ll show you “off country” ways to protect and grow your wealth away from the U.S. economy. You’ll have access to international experts who know about asset protection and offshore investing than anywhere in the world. To learn how to reserve one of the remaining seats, go to:
www.OffshoreInvestmentSummit.com
December 2016
12 www.sovereignsociety.com
n Chairman’s Corner
America’s Vital Continuity By Bob Bauman JD
A
s you may have noticed, the quadrennial U.S. presidential election produced a somewhat unexpected, and for many, uncomfortable result. Yet despite all the campaign drama about an alleged rigged election, both presidential candidates and the incumbent president immediately accepted the outcome without questioning its legitimacy. Long ago, Thomas Jefferson reminded us of the importance of that legitimacy: “The will of the people is the only legitimate foundation of any government and to protect its free expression should be our first object.” In our national history, has there ever been a more stunning, and for many, a more surprising example of the free expression of American voters? The U.S. Constitution, 229 years old, is the world’s longest surviving written charter of government, and it still works. When I studied at the Georgetown School of Foreign Service, I was assigned a report on the classic 1948 book The American Political Tradition by Richard Hofstadter. He quoted a great American writer whom I had the honor to know, John Dos Passos: “In times of change and danger, when there is a quicksand of fear under men’s reasoning, a sense of continuity with generations gone before can stretch like a lifeline across the scary present.” The late Will Rogers, a continuing source of common sense about American politics, might have been referring to 2016 when he wrote about the durability of our constitutional system: “Every time we have an election, we get in worse men and the country keeps right on going. Times have proven only one
www.sovereignsociety.com 13
thing and that is you can’t ruin this country even with politics.” On Election Day, I wrote: “The Wall Street Journal suggests that half the country will be deeply disappointed 24 hours from now, with losers thinking America is doomed; with winners relieved, but shocked and disgusted that nearly half of their fellow citizens voted for the moral equivalent of the devil.” Yet the immediate postelection remarks, first of President-elect Donald Trump, then of Hillary Clinton and of President Barack Obama, all recognized the wisdom of Abraham Lincoln’s admonition that “a house divided against itself cannot stand.” National unity, now and in the future, is a goal devoutly to be wished. I don’t mean unthinking surrender and compromise of principles, or bowing to forced agreements under pressure. There are available common solutions to our serious national problems, and now they must be debated and adopted. After the national election in 1862, a reporter asked President Abraham Lincoln how he felt about the results in New York, where a Democrat was elected governor. Lincoln famously responded: “Somewhat like that boy in Kentucky, who stubbed his toe while running to see his sweetheart. The boy said he was too big to cry, and far too badly hurt to laugh.” Whether this election produced tears or laughter for you, Americans should endorse Hillary Clinton’s good advice about Donald Trump: “I hope that he will be a successful president for all Americans,” she said. “We must accept this result and look to the future. We owe him an open mind and a chance to lead.” n Bob Bauman is a former U.S. Congressman from Maryland. He is an author and lecturer on wealth protection, offshore residence and second citizenship. Email Bob at [email protected] December 2016
n Ted's Tips
Know Your 2017 Tax Obligation
T
AX time is soon upon us. As I always recommend, one thing to do without fail is to make all your eligible retirement contributions, which you can do for tax year 2016 up to April 30, 2017.
This year’s (2016) tax brackets and retirement contribution levels can be found in the December 2015 edition of The Bauman Letter. For your convenience, below are the 2017 figures.
2017 TAX BRACKETS & TAX RATES Rate Single Filers Married Joint Filers
Head of Household Filers
Married Filing Separately
10%
$0 to $9,325
$0 to $18,650
$0 to $13,350
$0 to $9,325
15%
$9,326 to $37,950
$18,650 to $75,900
$13,351 to $50,800
$9,326 to $37,950
25%
$37,951 to $91,900
$75,901 to $153,100
$50,801 to $131,200
$37,951 to $76,550
28%
$91,901 to $191,650
$153,101 to $233,350
$131,201 to $212,500
$76,551 to $116,675
33%
$191,151 to $416,700
$233,351 to $416,700
$212,501 to $416,700
$116,676 to $208,650
35%
$416,701 to $418,400
$416,701 to $470,700
$416,701 to $444,500
$208,651 to $235,350
39.60%
$418,401 or more
$470,701 or more
$444,501 or more
$235,351 or more
2017 RETIREMENT CONTRIBUTION LEVELS Max Annual Plan Contribution Plan 401(k) Pretax $18,000 SIMPLE IRA & Solo 401(k) Catch-Up
Max Annual Contribution $3,000
401(k) After-Tax
$54,000
IRA (Traditional)
$5,500
401(k) Catch-Up (50 or Older)
$6,000
IRA (Roth)
$5,500
SEP IRA
$54,000
IRA Catch-Up
$1,000
SIMPLE IRA & Solo 401(k)
$12,500
Defined Benefit Plan
$215,000
December 2016
14 www.sovereignsociety.com
Note that the above limits: • Apply to all your retirement plans cumulatively • Do not apply to rollovers Tax deductibility of IRA contributions ends at a modified adjusted gross income of… • Unlimited if both spouses are ineligible for an employer retirement plan. • $184,000 if one spouse is eligible for an employer plan.
• Foreign Account Tax Compliance Act (FATCA) filing kicks in at aggregate foreign assets of $200,000 on the last day of the year or $300,000 at any time during the year for singles, and aggregate foreign assets of $400,000 on the last day of the year or $600,000 at any time during the year for joint filers. • Foreign Bank Account Report (FBAR) filing is required if your aggregate non-U.S. financial accounts total over $10,000 at any point during the year. n
• $119,000 if both spouses are eligible for an employer plan. For nonresident citizens of the U.S.: • The Foreign Earned Income Exclusion for 2017 will be $102,100 for singles and $204,200 for couples filing jointly.
I’m interested in hearing more from you. What is your No.1 concern when it comes to your assets and your freedom? Send your comments to me at [email protected]
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www.sovereignsociety.com 15
December 2016
n Final Thoughts
The Last Word
I
’VE always liked philosophy. I think it has to do
media assess them. Instead, they pick and choose
with my natural curiosity, skepticism and hostility
interpretations based on how it serves their agenda —
to authority. Something inside me believes that even though my body can be dominated, my mind can never be conquered. But what is truth? Philosophers never get tired of this question. On one hand, there are those like René Descartes, of “I think, therefore I am” fame, who believed that we can deduce the ultimate nature of reality mentally,
how it fits into their preferred “narrative.” Those with a small-government agenda choose interpretations that say inflation is higher than it’s reported to be, because they want government to stop printing money. By contrast, pro-government types latch onto interpretations that say “true” inflation is lower, because they want the government to carry on. The critical word here is “because.” The average
from first principles, without regard to the physical
person’s likelihood of believing one interpretation of
world around us.
something like inflation over another depends almost
On the other are “empiricists” like John Locke,
entirely on whether that interpretation supports what
who insist that we can only understand truth through
they’d like to see happening in the world. As such,
continuous engagement with the physical world.
“truth” has come to be defined by what people want
I fall in between. I accept that the physical world is the only source of “truth,” in the narrow sense of
to believe. The result is a world without facts, only opinions.
things that cannot be falsified. A dense stone thrown
Politicians and media moguls have ruthlessly
into a lake sinks every time, no matter how many
exploited and encouraged this. They flourish in a
philosophical arguments I generate to stop it from
society where people will believe anything as long as
doing so.
it fits their prejudices.
But I also accept that sinking-stone type truth is
But a society can only indulge in this kind
insufficient to operate successfully in the world. We
of nonsense if it can afford to do so … if the
also need concepts (like “density”) that only exist in
consequences of ignoring reality don’t hurt them too
our minds — concepts that “stand for” something
much. But what happens when we can’t afford to be
that must be real even though we can’t actually see it.
that blasé about truth anymore?
Why am I telling you this? Because the single biggest problem confronting ordinary Americans is the growing distance between truth and the way it is represented to us by politicians and the media. Consider, for example, the humble inflation rate. I’m certain there is a number that represents the actual rate of rise of prices in the economy, properly weighted. But nobody can agree on what it is. People write thousands of words daily about why the “official” inflation rate is wrong for one reason or
Ever pithy, Upton Sinclair put it this way: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” If you turn that maxim on its head, it says: “A man without a salary can’t afford not to understand things.” I suspect the United States is fast approaching a time when we can no longer afford to indulge our distaste for the truth. Who will we believe then? Kind regards,
another. The problem is that some of the people who think the official inflation rate is wrong are closer to the truth than others. But that’s not how politicians and December 2016
Ted Bauman, Editor 16 www.sovereignsociety.com
