It is Possible to Retire Tax-Free, and Here’s How.
The following is adapted from Divorce the IRS by James Miller.
You have probably heard the phrase, “Nothing is certain but death and taxes.” And while this is true, you may be able to do something about it — at least the tax part, anyway.
The United States tax code is over 74,000 pages long and contains over 3 million more words than the Bible. It’s no wonder taxes are such a big issue in financial planning and why they are so misunderstood. They don’t have to be, though, and it’s even possible to divorce the Internal Revenue Service (IRS) completely and enjoy a tax-free retirement, if you plan properly.
No matter how patriotic, I have never met anyone who was happy about paying a tax bill, especially one they didn’t expect. I suppose it’s happened, though, like when someone wins the lottery or finds themselves in a similar circumstance. I do meet people all the time who are happy to get money back from the IRS, though. They don’t usually understand that it’s either their own money being returned (without interest) or it’s a loan they will have to repay one day (most of the time, with interest).
I have been helping people with tax-free retirement planning for over twenty years now as an independent fiduciary financial advisor. I find that most Americans fail to create (or keep) real wealth. It’s not that they plan to fail but that they fail to plan. There are a myriad of reasons for this, but the one I help with in this book is among the largest: the IRS.
Americans have to work, on average, the first 111 days of each year just to take care of their tax burden. You can find out more about this on this book’s Resources page at Divorce-The-IRS.com. However, it’s enough to know this led to The Tax Foundation creating Tax Freedom Day in America — the day when the nation as a whole has earned enough money to pay its total tax bill for the year. In 2021, Tax Freedom Day will fall on April 17. This fact, along with tax traps — or tax time bombs waiting for the unprepared — has led to the IRS taking a larger share of people’s money than needed.
My book is for those interested in a journey to a specific destination: divorcing the IRS on retirement day and enjoying a tax-free retirement.
This is a path to success, as defined by you, that can only be achieved with proper, modern financial planning and forward thinking. It requires you to save as much as possible through the lens of your entire life ahead, not just this year or the next. It needs a deliberate direction to minimize your obligation to the IRS, both in life and after. It will be an odyssey, preparing you financially for all the things life may throw at you so your wealth creation has minimal interruptions and no fatal experiences.
This journey will take you to a destination where you get to enjoy the fruits of your labor to the maximum, without the IRS interfering. You’ll enjoy the feeling that comes with knowing you did things right and you’re ahead of the game. It’s a place where your delayed gratification and smart financial moves pay off exponentially.
There is a peace of mind that comes with knowing there won’t be any hidden financial surprises in retirement with respect to tax bills and knowing that even if tax rates increase, you won’t be affected.
The earlier you are in your journey to financial independence, the more I can help. The solutions and strategies presented can be implemented at any point in life, but due to government restrictions and contribution limits, the more time you have to implement these strategies, the better off you will be.
Tax time bombs can be a nasty experience, leaving a permanent mark on your bank account and on you as a person. You may have already experienced one or more or know someone who has. Maybe you think it will never happen to you or you know how to avoid them. However, it’s the ones you never see coming until it is too late that hurt the worst.
Here are some fun facts you may not know about taxes:
- In 2019, the US federal, state, and local governments collected a combined total of more than $5.3 trillion in taxes.
- Taxpayers lose out on millions every year by not filing returns! In 2017, Americans gave up over $950 million in refunds owed to them by not filing.
- Americans enjoy some of the lowest tax rates in the developed world. According to the Organization for Economic Cooperation and Development (OECD), the US ranks 26 out of 28 developed countries for tax burden.
- Americans have to pay taxes in America even if they don’t live there. The US is one of two countries in the world that taxes citizens worldwide.
Whether you plan on your own or with the assistance of a fiduciary financial and tax planner, I hope you do craft a plan for retirement. Although it may feel tempting to ignore these tax time bombs, my clients consistently tell me they have incredible peace of mind from proactively defusing them — not to mention they save significant money.
I hope your plan helps you enjoy a relaxing, fulfilling, and tax-free retirement. And I wish you a wonderful divorce from the IRS!
To learn more about how to retire tax-free, Divorce the IRS is available on Amazon.
Born in Zambia, married to a German, and having spent most of his life as an expat, James Miller, CRPC®, is no stranger to untangling complicated tax issues. He and his family enjoy international travel, sailing, mountaineering, and spending time with those they consider true friends.
The Founder of Baobab Wealth and Baobab Wealth Abroad, James helps Americans and cross-border families around the world create real wealth for themselves and their families in tax-efficient ways so they can maximize their own dreams in life and beyond.
