OPINION
Wallowa.com
LAYIN’ IT ON
THE LINE
Steve Kerby
Does your
retirement
account need
rescuing?
B
ecause of the accumulation bene-
fi ts of tax deferral, many individuals
have successfully created substan-
tial IRA or 401(K) accounts or other quali-
fi ed plans.
Many people are shocked at how much
of their tax-deferred balances will be erased
by current taxes when funds are withdrawn.
It is not uncommon for these accounts to
have amassed seven fi gures of total dollars.
It is also usually the case that little atten-
tion has been focused on what will happen
to one’s hard-earned dollars when taking
money out of the plan.
Reductions due to taxes
can be dramatic
The tax-caused decrease in total assets
going to family members can be dramatic.
For example, we recently reviewed a cli-
ent situation where the plan holder had a $6
million balance. The client wished to begin
distributions at age 70½. Further, the client
did not require any distributions to maintain
their lifestyle and wanted all the funds to go
to children. The client was disappointed to
learn that, under the client’s current struc-
ture when distributed over 10 years, the $6
million would be slashed because of taxes
by $2.6 million and only yield $3.4 million
net proceeds to the benefi ciaries.
The $2.6 million of asset erosion occurs
because all funds coming out of a qualifi ed
plan are fully taxable as ordinary income.
And, contrary to common belief, assets in
an IRA do not benefi t from a step-up basis
when passed on. Thus, while this case was
a reduction of some 43%, other plans can
be crushed by as much as 75% because of
income and estate taxes.
The existing plan had other vulnerabil-
ities, as well. One was the assets were all
held inequities subject to signifi cant drops
in value. Over a lengthy period, the prob-
ability that such a reduction will occur is
substantial.
How to increase net to
benefi ciaries without risk
Fortunately, a solution that could pro-
duce guaranteed results was possible in this
particular situation. We set up a plan where
taxable distributions from the IRA will be
used to purchase the appropriate type of life
insurance with the family named as ben-
efi ciaries. The client and the client’s fam-
ily can be much better off with this solution
because:
• Assets are shifted from taxable to
nontaxed.
• Total net after-tax assets to the family
are signifi cantly increased.
• The increase in assets is immediate.
• There is no need to enter speculative
investments to achieve the gain.
• The value of the account is not subject
to market losses.
• The results are guaranteed by some of
the most substantial fi nancial companies in
the world.
• The entire plan can be implemented on
a set-it and forget-it basis.
Implementing IRA rescue
for your qualifi ed plan
Each rescue of an IRA or 401K or other
qualifi ed plan is custom-made for your cir-
cumstances. For individuals with separate
plans and assets, net benefi ts can increase
from some 25% of asset value to many
times the asset value. For married couples
inheriting each other’s IRAs, the after-tax
yield can be much higher than otherwise.
IRA Rescue can be achieved by convert-
ing a client’s weakest assets — those with
the most signifi cant tax liabilities — to non-
taxed assets.
And while a plan’s asset value is signifi -
cantly increased immediately, the tax liabil-
ity on distributions from the plan is spread
over time, much to the client’s advantage.
All plans can and should be coordinated
with your accounting and legal, trust, and
estate advisors, and we do that as a matter
of course.
A complete solution is available with
plan distributions able to be executed on
schedule, trustees guaranteeing that pol-
icy premiums are paid as required, trustees
delivering gifts to benefi ciaries, and taxes
able to be paid at the funding source. These
solutions can truly be established to set and
forget while delivering much more fi nancial
benefi t to those for whom a client wished to
provide fi nancial security.
———
As an avid outdoorsman, Joseph and the
Wallowa area have been a big part of Steve
Kerby’s life since 1964. Steve is a Syndicated
Columnists member, a national organization
committed to a fully transparent approach to
money management. With over 50 years in
the fi nancial services industry, Steve special-
izes and focuses on each individual client’s
goals. Visit stevekerby.retirevillage.com or
call 503-936-3535 for more.
Wednesday, May 4, 2022
A5
From parachute rigger to pastor
WALLOWA
COUNTY
VETERANS
CORNER
Jack James
M
ission: To highlight some of the
awesome veterans in this county,
and as a form of education to the
general public and reminder of the service,
sacrifi ce, and sometimes fun of duty in the
U.S. Military Services. Wallowa County
has more than 7,000 residents; more than
1,000 of them are veterans. They are your
friends, neighbors, workers and co-workers.
Please take a moment and get to know them.
Remember — “Support the Troops” and
remember the veterans.
Tim Schmeck, Joseph, Oregon
Tim grew up and joined the Navy in
Klamath Falls, Oregon. He served in the
Navy from 1967 to 1971 and during his time
of enlistment (actually enlisting in the Navy),
the Vietnam War was in full-combat opera-
tional mode and on the TV news and news-
papers every single day. Tim was attending
the Oregon Technical Institute (now Oregon
Institute of Technology) and had a 2S Defer-
ment as a student (“2S” simply being the des-
ignation/meaning for an authorized student in
a school of higher learning). However, Tim
was not being “challenged” in school and
the spirit of patriotism was rising in his very
soul. So bam, he joined the Navy to serve his
country and to see the world.
Tim went to “boot camp” (recruit train-
ing) in San Diego, California, Naval Train-
ing Center. Toward the end of training, each
recruit is either assigned a job specialty (a
rating) or given choices based on perfor-
mance, test scores, and, of course, the “needs
of the Navy.”
Tim said that initially he had six choices
and that he wanted to be an “illustrator
draftsman.” However, as he talked to his
recruit company commander (RCC) and
walked down the list of choices, they all
seemed to not be available for one reason or
another, until his RCC brought up a choice
that wasn’t even on the list: parachute rigger
(PR). Tim said, “Sure, why not!” After grad-
uation from boot camp, Tim was on his way
to Navy PR School at Lakehurst, New Jersey.
(Note: If you remember your American
History, Lakehurst, New Jersey, was where
the German dirigible Hindenburg (light-
er-than-air, hydrogen aircraft) accidentally
caught fi re and burned to the ground on May
6, 1937).
At PR School (now called AirCrew Sur-
vival Equipment Maintenance man), he
learned about packing parachutes for pilots,
sewing machines (especially the 91 parts of
a Singer 111-W151, which had to be mem-
orized) and timing of them, packing para-
chutes, oxygen mask maintenance, as well
as survival packs and rafts carried in the
ejection seat. Another portion of the train-
ing included physical fi tness by U.S. Marine
Corps drill instructors, with the purpose of
preparing the graduating students for a para-
chute jump at the end of the training and their
very fi rst parachute landing fall (PLF), i.e.
hitting the ground without injury. (And most
importantly, being able to report to your fi rst
Contributed Photo
A young Tim Schmeck during his time in service.
command or duty station without being in a
leg cast.)
Tim remembered the parachute jump spe-
cifi cally, “Because once you were out of the
aircraft and the noise faded away, it got so
quiet, that you could hear the people talking
on the ground as well as those who were
jumping with me.”
Tim’s duty station for the next four years
was with Fighter Squadron VF-102 (The
Fighting Diamondbacks) at Naval Air Station
Oceana, near Norfolk, Virginia. However,
he made two deployments overseas; one on
the USS America (CV-66) and one on the
USS Independence (CV-62). He also remem-
bers deploying down to Naval Air Station
Roosevelt Roads Puerto Rico for what was
termed “Hot Pad Duty;” in other words being
available on the spot in order to support air
crews and pilots conducting predeployment
training.
Tim remembers the fi rst cruise on the
USS America very well, because it was a
unique and highlighted one, which included
cruising around the world and visiting many
foreign ports. It was a “dream come true” for
a new sailor in the Navy. Of course, the most
arduous portion was off the coast of Vietnam
on “line duty.” Sometimes almost 24 hours
of fl ight operations, continuous jet noise,
launching noise, jet fuel fumes, planes hit-
ting their “afterburners” like rockets and just
the monotonous continuous noise of a ship at
sea. When people mention a “city that never
sleeps” they might as well be describing a
ship at sea, especially a U.S. aircraft carrier
which is home to 5,000 men.
Tim has many memories of that fi rst
cruise, but one that sticks out was a refuel-
ing at sea from a British ship off the coast
of South Africa. Seeing British sailors in
shorts and talking about their “rum rations”
(unheard of in the U.S. Navy). The British
ship fl ying the “Esso Flag” just for fun (an
old fl ag symbolizing putting a “tiger in your
tank”) again, unheard of in the U.S. Navy
— fun at sea that is. After a good portion of
the around the world cruise on the America,
the crew was rewarded with a few days lib-
erty (time off ) in Sydney, Australia, then to
Wellington, New Zealand, and from there to
sailing below South America, then to Rio de
Janeiro, and fi nally they arrived back at their
home port — Norfolk, Virginia, in Decem-
ber, and Tim and a shipmate were able to
make it home to Klamath Falls for Christ-
mas. A very good fi rst cruise.
After a short stay in Oceania, Virginia,
Tim’s squadron was transferred to another
Carrier Air Group and soon deployed on
another cruise, this time on the USS Inde-
pendence (CV-62), getting underway fi rst to
the North Atlantic (six weeks) with a stop
in England, and then the remainder of the
deployment cruising the Mediterranean Sea
for six to eight months. Tim recalls hav-
ing liberty in the following countries: Malta;
Athens, Greece; Naples and Taranto Italy;
Cannes, France; and Barcelona and Valen-
cia, Spain.
Tim comments, “We had more time in
port than we had money!” Tim also remem-
bers having a Sunday “lay person’s church
service” in the forecastle (fo’c’sle) of the ship
(where the anchor and anchor chains are let
out and hauled in and stored, in the bow or
front end of the ship). A time for the sailors
to minister to each other and share the good
news of Christianity in their lives, hopes and
dreams. Tim came away from that cruise
with a new perspective for his life and a mis-
sion to become a bonafi de pastor himself.
Tim was honorably discharged from
the Navy and set off to attend San Jose
Bible College in Northern California, using
his rightly earned “GI Bill” to pay for the
schooling. After four years of school and a
few steps and turns, Tim became a “pastor in
training” in Oregon. First in ministry with the
Church in the Forest on Bly Mountain near
Bonanza, and later at Mountain View Chris-
tian Church in Joseph and fi nally merging
with Enterprise Christian Church, where he
has gone into semi-retirement. Another end
to another very good cruise.
———
Jack James is a 35-year veteran of the
U.S. Navy and serves as a veterans service
offi cer with the Disabled American Veterans
organization.
Government and charity can be slippery slope
ON LIBERTY
Devin Patton
O
ne of the reasons the U.S. Consti-
tution was “ordain(ed) and estab-
lish(ed)” was for the purpose of
promoting the general welfare of the citi-
zens. We’ve certainly grown accustomed to
the idea that the government should seek to
help those among us who are in need, but
was that something originally intended as a
role for the government?
Surprisingly, the Constitution makes
no mention of the government’s ability to
give charitably. It’s interesting to observe
that nowadays the idea that the government
should authorize charitable giving from
the treasury is taken for granted, but this
should come as no surprise — since our
nation’s early years, elected offi cials have
faced with the temptation to use money
from the treasury for charitable giving. This
temptation arises from the cultural pressure
rooted in the Christian values that were
vital to the formation of our nation: Who
would be so selfi sh as to deny the basic
principle that it is “more blessed to give
than to receive?”
The temptation to give from the treasury
also stems from the innate desire for power
and popularity, and our politicians recog-
nize the opportunity to garner support from
their constituents by leveraging the abil-
ity to vote for such charitable giving. When
the government functions as a charitable
organization, it not only robs the rest of us
of the responsibility and meaning found in
caring personally for our fellow citizens, it
opens the door wide for government cor-
ruption and cronyism.
My favorite story of Davy Crockett
excellently illustrates why the government
should not use money from the treasury
for charity. “A Sockdolager: What Davy
Crockett learned from Horatio Bunce” is a
story set during the time when Col. Crock-
ett served as a U.S. congressman, repre-
senting a district in Tennessee during the
late 1820s and early 1830s.
As Crockett was traveling the coun-
tryside campaigning for his next election,
he had a chance encounter with Horatio
Bunce, an apparently well-informed and
respected farmer in his district. The previ-
ous winter, Crockett had voted to appropri-
ate $20,000 for the relief of the victims of a
large fi re in Georgetown, near the Capitol.
Mr. Bunce had read of the vote in the news-
paper, and during a roadside meeting pro-
ceeded to explain to Crockett why his vote
in favor of the appropriation was unaccept-
able from a constitutional standpoint.
Crockett attempted to justify his vote by
explaining its merits: it was generous, and
the full treasury could aff ord such a rela-
tively small sum for the benefi t of women
and children. Bunce responded: “It is not
the amount, colonel, that I complain of; it
is the principle. ... The power of collect-
ing and disbursing money at pleasure is the
most dangerous power that can be entrusted
to man. ... If you had the right to give any-
thing, the amount was simply a matter of
discretion with you, and you had as much
right to give $20,000,000 as $20,000. If
you have the right to give to one, you have
the right to give to all; and, as the Consti-
tution neither defi nes charity nor stipulates
the amount, you are at liberty to give to any
and everything which you may believe, or
profess to believe, is a charity, and to any
amount you may think proper. You will
very easily perceive what a wide door this
would open for fraud and corruption and
favoritism, on the one hand, and for rob-
bing the people on the other.
“No, colonel, Congress has no right to
give charity. Individual members may give
as much of their own money as they please,
but they have no right to touch a dollar of
the public money for that purpose. If twice
as many houses had been burned in this
county as in Georgetown, neither you nor
any other member of Congress would have
thought of appropriating a dollar for our
relief.
“There are about 240 members of Con-
gress. If they had shown their sympa-
thy for the suff erers by contributing each
one week’s pay, it would have made over
$13,000. There are plenty of wealthy men
in and around Washington who could have
given $20,000 without depriving them-
selves of even a luxury of life. The con-
gressmen chose to keep their own money,
which, if reports be true, some of them
spend not very creditably; and the peo-
ple about Washington, no doubt, applauded
you for relieving them from the necessity
of giving by giving what was not yours to
give.
“The people have delegated to Con-
gress, by the Constitution, the power to do
certain things. To do these, it is authorized
to collect and pay moneys, and for nothing
else. Everything beyond this is usurpation,
and a violation of the Constitution.”
This abbreviated version of the story of
Bunce illustrates three important lessons:
First, the responsibility to take care of the
needs of others should fall to those of us
who are capable, even though it is easy to
shirk our responsibility and let other insti-
tutions (such as the federal and state gov-
ernment) serve that role.
Second, elected offi cials who don’t
respect the limitations placed upon them
by the Constitution will always be tempted
to spend money that’s not theirs in order to
gain political support, and even those who
give from the treasury under the guise of
“charity” may have ulterior motives.
Finally, we should all aspire to be as
well-informed and honorable as the humble
farmer, Horatio Bunce.
———
Devin Patton is a fi fth-generation Wal-
lowa County native whose pastimes include
the study of ag economics, history and free
thought.