Three Important Questions:
1. When you retire would you like to have your income be taxable or tax free?
2. Is all of your money going into accounts that will be taxed in the future?
3. Are taxes going to go up in the future?
Most people are saving into tax qualified plans such as IRAs, 401k, 403b, Deferred Comp, SEP, etc. When you have a tax qualified plan you get a small tax deduction up front so you can pay a large tax later when you take income.
Your entire qualified plan including your contribution and gain is 100% taxable. Depending on your tax bracket when you retire you will be sending 20-40% of your income to the Internal Revenue Service and your State Government.
Next to market crashes, taxes are the biggest destroyer of your wealth. Remember� Tax Deferred means Tax-Delayed.� When you are looking at your retirment plan make sure you are looking at after tax dollars. If your plan has you taking out 50k per year but then you retire and your after tax income is only $40k, that could be a problem. Watch this short video and learn how you can earn Tax Free Interest and Tax Free Income at retirement.
If you have a high net worth and have a large amount of money in qualified plans, future taxes could crush your retirement savings. If your IRA grows to $1,000,000 or more how much will go to the IRS? It wasn’t to long ago the top tax bracket was Seventy Percent!
If you have a small business watch this video to learn how to convert tax deductible corporate dollars into tax free retirement income.
How to create tax free income…
There are three common places to accumulate tax free interest:
1. Tax Free Municipal Bonds
Municipal bonds have averaged just over 3% for the last decade and don’t provide the necessary return to outpace inflation or provide the diversification we need for retirement.
2. ROTH IRAs
Great for saving $4000-$5000 per year as long as you don’t make over $110,000 per year filing single or $160,000 combined household. After 2010 you can do a Roth Conversion regardless of income. But if you make too much money you still cannot contribute to a ROTH. Of course, a ROTH also has government strings attached and you can’t access gains until after 59.5 unless you qualify under the rules the government sets.
3. Life Insurance
The first role is to provide death benefit protection for your loved ones but there are other living benefits many people are not aware of. Properly structured, certain types of life insurance policies allow you to fund unlimited amounts of money into the policy. The concept is to overfund the policy. The funds grow tax-deferred and are withdrawn tax free through policy loans. Distribution is not reported as income because it is a policy loan. The policies will then have indexing crediting strategies that allow you to earn interest based on the performance of certain market indexes as offered by the different insruance companies. The top insurance companies we use will have historical crediting rates in the 7% to 9% range. The money you have in the policy is contractually guaranteed against market losses. (Always balance the benefits with the loads, cost and fees of the policy. There are hundreds of insurance products on the market and not all are good. Feel free to contact us for a more detailed overview.)
Watch a short 5 minute video here.
For over 200 years Life Insurance has been the cornerstone of financial planning for the wealthy and FORTUNE 500 companies. With the trillions of dollars in market losses, people are turning back to this proven strategy. Even the financial media, which is largely influenced by the advertising dollars of big Wall Street brokerages, can’t ignore the proven track record. CNBC begrudgingly covered this recently.
CNBC talks about fixed rates in the 4-4.5% range. Rates have actually increased to over 5%. They also did not mention the upside the index crediting strategies available in each policy.
