Saving for retirement used to be easy.
Stash away a few bucks from every paycheck until you build a nice nest egg. Retire in your 50s or 60s and spend your golden years bouncing grandkids on your knee.
That’s how things used to be until Uncle Sam and the nanny state created a labyrinth so complex it made the French catacombs look like a kindergarten maze.
The good intentions to encourage retirement built a Byzantine tax system few understand.
So, trust us when we say this — BOB CARLSON IS A RETIREMENT GENIUS!
For more than 30 years, he has helped everyday folks navigate the savings waterways to ensure they receive the MAXIMUM BENEFITS and leave nothing on the table.
Which is why today’s newsletter shines a light on a HIDDEN TAX buried deep in the bowels of the IRS.
At first, we didn’t believe Bob when he told us that this well-kept secret actually existed.
Surely there was no way A STOCK COULD BE TAXED IN AN IRA…
…that would negate the only benefit of these accounts.
But like all the incredible insights Bob covers in his book “The New American Retirement Plan”, which he makes available to anyone who CLICKS HERE, his deep experience proved its metal.
So what is this body buried by politicians?
The Radioactive Retirement Stock
Most of us are familiar with Individual Retirement Accounts (IRAs).
Roth IRAs allow you to pay taxes now and take tax-free distributions in the future.
Traditional IRAs defer tax payments until the future.
However, if you earn “unrelated business income” you get hit with an Unrelated Business Income Tax (UBTI), which only applies to companies that don’t pay corporate income taxes.
And there is one group that’s set up to do this — Master Limited Partnerships (MLPs).
MLPs are a very common type of energy company that deals with the transportation and distribution of energy.
Think of Energy Transfer LP (ET), one of the largest pipeline operators in the United States, as an example.
When you own shares of Energy Transfer, you are a unitholder, which makes you more of a direct owner of the business.
Rather than pay income taxes, the MLP passes along 90% or more of its income to unitholders, who then pay those taxes.
Here’s a step-by-step example of how it works:
- Energy Transfer gets paid to move natural gas through its pipelines. That produces its revenue. Let’s say that comes to $10,000.
- The MLP then deducts operating expenses such as sales, administration and other direct costs. We’ll say that’s another $7,000.
- The company applies indirect costs like depreciation that reduce income by another $2,500.
- The net income is now $500.
- You get paid this as a distribution, which is like receiving a dividend.
Now, the IRS sets an annual limit of $1,000. So, as long as your portion of the profits is less than $1,000 (your distributions received), you don’t have to pay taxes.
If it’s greater than $1,000, you pay taxes, whether in a Roth or traditional IRA. Hence, you get hit with a double tax.
But that’s not the end…
When you sell your stake in the MLP, all those indirect costs like depreciation, etc. get “recaptured.”
Here’s an example of how that works:
- Say you bought a $50,000 stake in an MLP (if it’s easier, assume you bought 1,000 shares for $50 a piece).
- Over the next five years, you accumulated $15,000 in indirect costs that were not taxed.
- You sell your stake for $75,000. (if it’s easier, assume you sold 1,000 shares for $75 a piece).
- Your initial capital gains are $75,000 – $50,000 = $25,000.
- However, your capital gains are reduced by the ‘recaptured’ costs leaving you with $25,000 – $15,000 = $10,000.
- That other $15,000 is taxed.
If all this sounds like a mess, you’re right, it is. The reporting requirements on these entities are also a massive headache.
For those who don’t use retirement accounts and use regular brokerage accounts, then MLPs are phenomenal since you only pay taxes once!
But for retirement accounts, they usually aren’t worth it.
Here’s the good news…
Bob Carlson knows EXACTLY how to build your portfolio with something similar to an MLP but DOESN’T SUFFER DOUBLE TAXATION.
He’s got two easy solutions, and here’s the first…
MLP ETFs.
ETFs like AMLP own MLPs in their portfolio and pay pretty hefty dividends as well. However, unlike the distributions (dividends) paid by individual MLPs, the dividends paid by MLP ETFs aren’t subject to the UBTI.
So, you can invest in a basket of MLPs and still get the majority of the benefits plus diversification.
However, there’s something even better out there…
…it’s helped many billionaires get to where they are today…
…and it’s permitted for most retirement accounts.
Bob Carlson lays it all out in his book, which can be in your hands in a matter of minutes.
