THOUGHT FOR THE WEEK – April 23, 2015

life insuranceThere is a positive correlation between the age of the advisor and the age of the client. I have few clients who are millenianals, but many who are roughly my age. And while I spend a lot of time helping them massage their retirement portfolios, one of the issues that surfaces frequently are the taxes that have to be paid. Too much of Americans’ retirement assets are contained within their IRAs, 401(k)s and other qualified plans. Like their health care, their retirement is almost totally under the control of the Federal Government.

* Where they can invest
* When they can take out the proceeds
* When they must take the proceeds
* How much they must take
* And, what the taxes will be

Combine that with the regulations around Social Security and the rules of their pensions (if they have one) and retirement planning isn’t about getting the most out of your assets, but rather how to get penalized the least from the Federal Government.

Perhaps I am being a little overdramatic; but all too often I see situations where clients would be much better off if they had more non-qualified investments and pension strategies when retirement time comes around. That’s why using Index Universal Life makes so much sense to successful younger clients who are looking to put away money out of the reach of the tax man with no risk in a down market and nice results when the S&P performs.

Imagine a Roth IRA (after-tax money going in, but coming out tax-free), but not part of the Government program;

* No restriction on how much you can contribute
* No tax on the appreciation
* Interest credited up to 13% when the S&P is cookin’
* Minimal cost to guarantee no losses
* Tax free income in retirement
* And, tax free distribution of whatever is left at death

I should be talking from experience, but unfortunately, when I should have been doing this, they weren’t available. They require discipline and an awareness that life is fleeting. I’ve got lots of good memories, but damn, how time flies.

Recently an advisor associate in California penned this next paragraph to share with me and others. He was talking to us as financial planners who take ourselves seriously. This is what he said:

“You really should offer these plans to your younger clients who are trying to put away annual savings for retirement. We just showed one to a 42 year young business man. He will be investing about $30k per year to build a retirement account for himself. Some of that will go into a qualified plan but we suggested he put $10,000 per year into the insurance strategy. We minimized the insurance to the legal minimum but still it gave him over $1/4 million to start. By the time he is 65 he will have put away $240k and if the S&P only averages 6.8% he will have over $450k in his account and will be able to take over $27k per year tax free in retirement. With safe money interest rates so low and unlikely to rise in the foreseeable future, and the stock market bouncing every which way like a football landing on a hard surface, clients are quickly appreciating the safety, efficiency and predictability of these plans.”

Call, text or email me if you want to know more…