Are You Taking Advantage of Tax-Free Retirement?

Tax-Free Retirement

Are You Taking Advantage of Tax-Free Retirement?

At the end of the day, it is not how much you make that counts - it is how much you keep! Building a million dollar or five million dollar nest egg is great, but no one knows where taxes will be in the future and how much of that nest egg you will keep. The fact of the matter is, you could end up paying up to 40% or even 50% taxes, or even more in your retirement years This could significantly decrease the long-term value of your nest-egg you've built for retirement.

Currently, the government’s only solution to the failing social security system are tax-deferred accounts, for the most part. However, these accounts have inherent issues that most people do not think about. Other than a Roth IRA, you have either a traditional IRA or a 401K plan to invest in for retirement.

Fortunately, there are strategies you can use today to enjoy more money in your retirement years. A successful tax-free retirement strategy could ensure you have more money in your retirement years. At the moment, most of us are relying on traditional retirement plans like an IRA or a 401(k), but these plans have their limitations and also have inherent risks that most people don’t consider.

Risks

There are two major risks that are usually not talked about when using tax-deferred accounts for retirement. The first being market risk. This becomes more of a problem the older you get. It comes down to how much you can afford to lose in the market. How many years can your retirement handle a year like 2008? How many years would your retirement be postponed with 38%+ losses. If you are in the beginning of your career and you are young, you may have time to make up these losses when they occur. This is not the same for a person at or close to retirement.

The second major risk is tax risk. With the state of social security, our national debt on the rise and health care, the chances of taxes rising significantly is a real threat. Because you put money into a traditional IRA or 401(k) plan, on a tax-deferred basis, not only is your original investment is taxable, but the entire growth of the account as well. If your money has grown significantly, this could mean a huge tax bill due to Uncle Sam. Some experts think future tax rates could be as much as 50% to 60% or even more.

During your retirement years have fewer tax deductions to lower your tax liability. If your home is paid off, you will no longer have the mortgage interest deduction. Also, chances are your children will be older and you will no longer get that deduction well.

RMD's

Another issue with the current retirement vehicles is your RMD’s (Required Minimum Distributions) that will start at age of 70-1/2. You will be required to take a required minimum distribution from your taxable retirement accounts. You must take that RMD, and pay taxes your money which now affects the compounding interest on your money. Your RMD's must be taken whether you need the money or not. There is a significant tax penalty if you fail to take the money out of your account, so there is really no choice. This is not the case with a tax-free retirement vehicle.

Forms of Money

There are various forms of money that are available to you. It's important that you understand each. Most people will always take the free money, which is what you should do, but they then immediately skip over the tax-free money and will immediately go to the tax-deferred money. To understand the each of the forms of money, let’s take a look at the options below:

1. Free Money 
• 401(k) match from your company 
• Inheritances 
2. Tax-Free Money
• Roth IRA (tax-free withdrawals) 
• High cash value life insurance 
3. Tax-Deferred Money
• 401(k) 
• Traditional IRA 
• TSP 
• SEP-IRA 
• Retirement accounts 
4. Taxable Money
• Wages 
• Capital gains 
• 1099 interest 

If you have an opportunity to take free-money, you should, but the next best option, tax-free money is always overlooked, by most.

Government

It is no secret that the government is deep in debt. In order to to cure that debt, they have the ability to increase taxes to be able to generate income from the 16+ trillion dollars that is currently in retirement plans. If you want to enjoy a financially successful and stress-free retirement, you need to start planning now - not just for wealth accumulation, but adding a tax-free option to your retirement strategy as well.

Indexed Universal Life

What many savers do not know is that the IRS already provides a vehicle to individuals to accumulate wealth on a tax-free basis. This strategy has been used by the wealthy, our banks and our largest corporations in America for a very long time.

These IRS tax codes for tax-free retirement withdrawals take a number of forms, including:

• Internal Revenue Code IRC 7702 -- accessing money tax-free through a life insurance policy. 
• Internal Revenue Code IRC 101 -- how a life insurance death benefit passes tax-free. 
• Internal Revenue Code IRC 72e - how money accumulates in High Cash Value Life Insurance tax-free. 

Two Tax-Free Options

When it comes to tax-free retirement, there are really only two choices. Let's see how they both stack up:

1. The Roth IRA 
• There are strict limits on how much you can contribute 
• The money grows tax-free 
• Money is withdrawn tax-free 
• The account is subject to market losses 
• The money cannot be withdrawn until age 59-1/2 
• Income limitations on who can contribute
2. High Cash Value Life Insurance - Indexed Universal Life (IUL)
• Unlimited contributions 
• The money grows tax-free 
• The funds do not affect Social Security 
• The money is withdrawn tax-free 
• Provides a generous death benefit for your family 
• There is no loss of principal even in a down market 
• You can access the funds at any time 

As you can see, using an Indexed Universal Life policy has a number of important benefits over a Roth IRA, including the elimination of stock market risk, freedom from future tax rate increases, the avoidance of future taxes on the money you worked so hard to earn and put away and no caps on the amount of money that can be put into the plan. In addition, using an Indexed Universal Life policy allows you to take out money whenever you need to. There is no need to wait until an arbitrary age to access the funds in your account. This is a particularly powerful advantage for men and women who hope to retire early.

When you use this strategy, you do not have to worry about withdrawals affecting your Social Security benefits. The money you take fro your Indexed Universal Life policy does not affect your Adjusted Gross Income (AGI) for Social Security purposes. This allows you to keep more of your Social Security, if it still exists when you retire.

A major benefit when using an Indexed Universal Life policy that is not available with any other retirement option is that upon your death, from day one, there will be a death benefit that is passed tax-free, probate-free to your heirs!

It’s important to understand all strategies that are available to you and if you currently have a retirement vehicle, supplementing that vehicle with an Indexed Universal Life policy, makes solid financial sense.

Contact us at Family First Life to schedule an appointment to learn more about this option that may be available to you.

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401K versus Indexed Universal Life

In the past few decades, people have fallen prey to the myth that risking everything is far more valuable than safety, steady long-term growth and predictable income. Wall Street firms had much to gain by supporting this contrarian belief. Since the advent of the 401K, the stock market has almost quadrupled in total assets. This was a huge payday for Wall Street firms, but was just as much a loss for working class Americans. Prior to this, it is estimated that as much as 50% of people's savings went into High Cash Value Life Insurance.


The possible losses from market risk has to be taken into consideration. The larger this investment grows, the more you have to lose in a down market. In 2008 alone, the average employee lost 14% of their account's value. That may not seem like much to a young person just entering the workforce, but people that were near retirement and had more money invested, suffered a a disproportionate loss. Accounts for these individuals saw a 25% loss. This certainly affected some people's retirement and some either had to continue to work or accept less money during their retirement years.


In addition to market risk, tax risk could be even worse. With our National Debt on the rise, government spending, Social Security and Health Care costs, raising taxes is the only way for our government to to pay for pay for these costs. In addition to higher taxes, you will have less writeoffs and deductions. You will not have your mortgage interest, 401 tax deduction, or child credit/exemptions - inflation alone could bump you into a higher tax bracket. In coming years, taxes could consume as much as 50% of your income, or more.


It doesn't have to be this way...


America's large banks, corporations and super wealthy don't put their money where everyone else does. They use a wealth concept that has been able to stand the test of time, even during our country's most darkest hours. High Cash Value Life insurance is used for it's Tax-Free cash accumulation, liquidity and the Tax-Free, probate free death benefit.


An Indexed Universal Life (IUL) allows withdrawls of your money at anytime with no penalty, there are no losses in a down market and there are no RMD's (Required Minimum Distributions)  to consider at age 70 1/2. Also, there is no maximum limit on the amount that can be contributed.


Only a professional should be trusted to assist you with properly structuring an Indexed Universal Life policy for Tax-Free Retirement. There are many ill-informed and untrained agents when it comes to this product. Selecting the appropriate death benefit, payment amount, indexing strategy are what make this the most powerful tool to build retirement income as well as leave a legacy for your family for generations to come.


Our agents at Family First Life are trained directly by our Annuity and Retirement Division and are skilled in this concept. Contact us today to meet with a professional that can show you how much money you can retire with, TAX-FREE!



Michael Pfeil
Licensed Agent
Family First Life
mpfeil@familyfirstlifemd.com

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Smoking Will Cost You 6+ Million Dollars!

Last week I took my daughter to the mall. While walking in, she saw someone she knew from school and he was smoking. My daughter said, "Dad, that's gross!". I then replied, "That will probably cost him over a million dollars, too!". Today I wanted to run an Indexed Universal Life (IUL) Illustration just to see what this seemingly small amount of money each day would really cost a person in lost potential income gains.


The boy we saw was 16 years of age. If you use a cost per pack of cigarettes of $7.50 and assume a pack-a-day habit, you will spend $2,737.50 in one year or $228.12 per month on your habit.   If you were to invest $228.12 per month into an IUL from age 16 to age 65, you would be able to draw $183,766 per year, TAX-FREE, from age 65 to age 100! All of this without your money being at risk, like a 401K or IRA and then having to pay the IRS tax on your money. This investment also provides your loved ones with a TAX-FREE death benefit!


The assumptions used in this Illustration, are as follows:

• 20 Year Backcast of the S&P 500 with an average rate of return of 8.10%.
• Top 5 of the 7 Indexing Strategies used to provide diversification.
• Increasing Death Benefit Option used to Age 65 and Level from 65 to 100.
• Minimum Death benefit selected to increase cash accumulation.
• Premiums stop at age 65, as account will be fully funded.
• Withdrawls taken from age 65 to 100.

Illustration

This is a perfect example of how small, consistent actions can compound into something huge over time! Insurance companies don't advertise anything flashy, but what they offer are risk averse products that consistently perform, year after year.



Michael Pfeil

Family First Life
mpfeil@FamilyFirstLifeMD.com

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Companies Started or Saved By Life Insurance

High Cash Value Life Insurance

High Cash Value Life Insurance is one of the most under utilized investment vehicles, used today. With people like Suze Orman and Dave Ramsey telling everyone how terrible this product is and that no one should buy it, it's no wonder this product is so misunderstood. All financial products have their place, each for a specific situation. For anyone to have a one size fits all solution is incomprehensible. With the insurance industry being such a highly regulated industry, they would have discontinued offering the product, long ago.

If High Cash Value Life Insurance did not exist, the landscape of American business would look very different today. Below are a few famous companies that were either started or saved by Life Insurance.

Stanford University

Leland Stanford was the company's first president in 1868. He died in 1893 at which time the university fell upon difficult times financially. His wife, Jane L. Stanford, tried unsuccessfully, to raise the necessary capital to avoid a temporary closure of the school. She was, however, able to use the proceeds from her husband's Life Insurance policy to continue funding operations and to keep the school open.

Disneyland

Before Disneyland there was Walt Disney Studios, founded in 1923 in Los Angeles, CA. Eventually, Walt wanted something more and began to dream of opening an amusement park. Achieving traditional forms of financing proved to be difficult, so Walt decided to provide his own financing. In 1955 Disneyland was opened, in large part to his Life Insurance. He mortgaged everything he had, including his High Cash Value Life Insurance policies to fund the $17 million dollar venture.

JC Penney

James Cash Penney started working at a Golden Rule Store in 1898. He was eventually offered a partnership with the original owners. By 1907, the partnership was dissolved and and Penney purchased complete ownership of all three stores. Following the stock market crash of 1929 and the Great Depression, Penney found himself unable to meet payroll and day-to-day expenses. He was able to borrow from his two Life Insurance polices to help the company weather the storm.

McDonalds

In 1955, Ray Kroc decided to buyout his then partners Richard and Maurice McDonald. During the first eight years, Kroc did not take a salary. He had to overcome ongoing cash-flow issues and payroll expenses. He was able to borrower from two of his Life Insurance policies, in addition to borrowing money from his bank.

Foster Farms

Max and Verda Foster started Foster farms in 1939. They were able to do so with a $1,000 that was borrowed from their Life Insurance. They made an investment in an 80-acre farm close by Modesto, CA. They started out raising turkeys and then eventually, chickens. They now have over 10,000 employees and their products are sold globally.

The Pampered Chef

In 2002, The Pampered Chef was acquired by Berkshire Hathaway Corporation for $1.5 billion. Today the company has over 12 million customers. All of this started from $3,000 that Doris Christopher borrowed from her Life Insurance policy. She was able to use the cash to start the business from her suburban Chicago home in 1980.

To Learn More About High Cash Value Life Insurance, Call Family First Life Today!

(844) 298-7027

www.FamilyFirstLifeMD.com

Asset Protection, Wealth Preservation & Wealth Accumulation

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Tax-Free Retirement Basics

Family First Life

Tax-Free Retirement
Asset Protection, Wealth Preservation & Wealth Accumulation

Watch our video to learn more about Tax-Free Retirement

Call Family First Life Today!

(844) 298-7027

www.FamilyFirstLifeMD.com

Asset Protection, Wealth Preservation & Wealth Accumulation

Looking For A New Career? Visit Our Jobs Website www.FamilyFirstLifeJobs.com

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Do You Want To Pay Taxes On The Seed or The Harvest

Uncle Sam loves Qualified plans.  He basically has your retirement money mortgaged and holds a lien against it with a tax liability.

Here is the main issue with Qualified Retirement Plans that no one talks about:

With a Traditional IRA or 401K, you are simply deferring taxes to an unknown amount on the entire growth of your account.

If you are at a 33% tax rate and put $6,000 (the seed) into an IRA/401K, you would have received a $2,000 deduction.  However, if that account were to grow to $100,000 (the harvest), you will now have a $33,000 tax liability.

You have basically traded a $2,000 deduction, today, and converted it to a $33,000 tax liability, tomorrow.

Contact Family First Life of Maryland to meet with an advisor to discuss a Tax-Free Retirement option!

Michael E. Pfeil

Family First Life of Maryland

www.FamilyFirstLifeMD.com

mpfeil@familyfirstlifemd.com

Looking For A New Career? Visit Our Jobs Website www.FamilyFirstLifeJobs.com

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Gift Of A Lifetime

SITUATION

SOLUTION

 THE POLICY

HOW IT WORKS

WHAT DID WE ACCOMPLISH

Michael Pfeil

Family First Life of Maryland
www.familyfirstlifemd.com
mpfeil@familyfirstlifemd.com


Looking For A New Career? Visit Our Jobs Website www.FamilyFirstLifeJobs.com

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Indexed Universal Life Insurance

Indexed Universal Life

"Buy Term and Invest The Rest" 

 A common phrase in the insurance industry you will hear is, "Buy Term and Invest The Rest". This does not Always work for everyone and is the reason why today only 5% of people at age 65 can retire. Also, the majority of the people that I personally meet with are 60+ years of age and have 30 year mortgages with $0 in Savings and $0 in Life Insurance.

Market Risks

When you invest your money in the market whether it be in stocks, mutual funds, etc. your money is at Sequence of Returns Risk, potentially causing unexpected losses. Although this is not an issue for younger folks, it can be an issue for people near or at retirement age. Another issue to consider is Tax risks. No one knows where taxes will be in the future, so this can drastically reduce money in retirement when taxes increase significantly.

Index Universal Life Option

My personal recommendation is a large term policy to cover a person while their debt is at its highest and term insurance is at its lowest cost and also purchase an IUL (Indexed Universal Life) policy with an increasing death benefit that would be fully funded by age 65. At that point, I would change the strategy to a level death benefit from 65 to 121 to bring down the cost of insurance. At 65, you then turn on 0 net cost policy loans from 65 to 100 and have the policy pay you Tax-Free Income for the rest of your life. This will also provide a death benefit for your loved ones during this time, in addition to providing you with Tax-Free Income.

I am in no way saying this is the end all be all solution for your retirement and insurance needs. There are many carriers with many different products and everything has a solution for a specific problem. In addition to the IUL, I would also invest in the market and in your 401K and or IRA, as well. For anyone to ever give a strategy without a conversation to fully understand your specific situation is highly suspect.

Also, all money not in life insurance is taxable and that should also be considered. Additional income from other sources, other than Life Insurance, could affect your AGI (adjusted gross income) and cause higher taxation on social security benefits and also may be able to be taken by bankruptcy courts and/or creditors, should a situation like that arise. Money in high cash value life insurance may be protected from bankruptcy courts and/or creditors and does not affect your AGI (adjusted gross income) when it comes to social security. A Life Insurance Death Benefit is also passed tax-free, probate free to your loved ones.


For more information, contact us at Family First Life to meet with a professional to discuss the best option for you and your family!

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