The Real Tax Truth within 401k’s and IRA’s
15Then the Pharisees went out and laid plans to trap him in his words. 16They sent their disciples to him along with the Herodians. “Teacher,” they said, “we know you are a man of integrity and that you teach the way of God in accordance with the truth. You aren’t swayed by men, because you pay no attention to who they are. 17Tell us then, what is your opinion? Is it right to pay taxes to Caesar or not?”
18But Jesus, knowing their evil intent, said, “You hypocrites, why are you trying to trap me? 19Show me the coin used for paying the tax.” They brought him a denarius, 20and he asked them, “Whose portrait is this? And whose inscription?”
21″Caesar’s,” they replied.
Then he said to them, “Give to Caesar what is Caesar’s, and to God what is God’s.” (Matthew 22:15-21)
Does putting money in a Qualified Plan (401k or IRA) break both parts of Jesus’ command in Mt 22:21 above? We’re not going to say that it does as a matter of theological certainty, but we are going to ask you to ponder this question for yourself.
We’re going to spend the next several posts discussing whether or not it make sense, from a tax perspective, to put money into tax deferral vehicles that the government has set up for you such as 401k’s and IRA’s. But we’re going to start by thinking about this spiritual question before getting into the numbers of whether or not it’s a good idea.
Jesus said to “Give to Caesar what is Caesar’s, and to God what is God’s.” By putting money into a qualified plan – ask yourself – are you doing either of these things? You have not given the government its portion and you don’t have the full legal rights and authority to steward God’s portion (that which is left to you after the government has taken its share). The account is in limbo, neither fully owned or controlled by your or your partner, the government.
If you do not have the right to steward this money in the way that the Lord calls you to because it is locked into an account co-owned and predominantly controlled by the government, are you really stewarding this money the way the Lord would have you do it?
For the record, Jesus’ point was that we should live our worldly lives within the confines of the earthly rules, while at the same time giving all of our spiritual life to Him (which includes all of our physical life to the extant allowed by law). (Romans 13:1-7) When and if we do this, none of the worldly barriers can restrain His power and will from being done and thus the laws of our land are not of consequence to constrain our purpose as sons of God. Of course, we are called to steward what we are given well and thus the question becomes relevant even if a little inflammatory. Also, it should be noted that putting money into a QP is well within (and encouraged by) the rules of the US Government, so it is in no way avoiding following the laws of the land.
Again, we’ll spend the next few days examining the tax laws to see if it makes financial sense to lock money away in 401k’s, 403b’s, and IRA’s, but before we do this we wanted to give you the chance to pray about whether or not these vehicles are God honoring. Only you can decide that in your life.
Photo credit: Luki Berlin