Jack asked himself a simple question: What would happen if I invested $500 per month ($6,000 per year), earned 10% annually compounded, and stayed the course for 35 years—from age 30 to 65—without any losses, fees, or taxes dragging me down? Jack realized these weren’t just minor inconveniences, they were wealth- destroying forces that could rob him of his financial independence. A Harsh Reality Most of his colleagues shrugged these factors off as “the price of poker.” But Jack wasn’t willing to leave his future to chance. He wanted to know the real cost—to measure exactly how much these obstacles would drain from his account. At the end of the day, advisors, firms, and markets might influence his results—sometimes for better, sometimes for worse—but Jack knew one thing for certain. He alone would live with the outcome. Jack’s First Decision Like many people, Jack’s peers relied heavily on tax-qualified retirement plans—401(k)s, IRAs, SEPs—because they could defer taxes and invest the full dollar rather than the after-tax $.80. But Jack wasn’t convinced. He knew: Qualified plans don’t eliminate taxes—they only postpone them. Every withdrawal will be taxed as ordinary income, not the lower capital gains rate. Taxes will be due at future tax rates, which are almost certain to be higher. Arguments exist both for and against qualified plans—which meant there was no guaranteed winner.
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