The fact of the matter is, no one following the strategies I will outline in this letter lost money due to market volatility—not after 9/11 and not even in 2008. During that time many clients not only doubled their money tax-free during the lost decade, but by year-end 2012, many people following our strategies actually tripled their money tax free from 2000 to 2012. Keep reading to see how.
Over the last few years, the economy has been a bit better, but the upturn isn’t here to stay. The stability and predictable growth of real estate and stock market portfolios are a thing of the past. The global economy, terrorism, massive national debt, national healthcare, and higher taxes have created a entirely new financial landscape.
I’m warning you. Those “incredible days” of consistent and reliable stock market growth are gone! Additionally, the periods of year after-year predictable real estate appreciation are gone, as well.
THE “BUY AND HOLD” IS NO LONGER WISE ADVICE. The notion that the market always goes up is no longer true. Traditional IRAs and 401(k)s are not the best way to save for retirement. In fact, they are no longer even a good way to go. People are typically not in lower tax brackets when they retire—that has not been axiomatic for the last 25 years. Yet most people continue to put money into tax deferred accounts, following traditional advice—doing the same thing over and over again, expecting different results (isn’t that the definition of insanity?). They will end up outliving their money due to the negative impact of taxes, inflation and continued market volatility.
It doesn’t have to be this way any longer if you take action right now.
Postponing your financial education is like ignoring a big rock in your shoe … you can still walk but it’s going to be painful. If you’re like me, I avoid pain at all expense, and FOR THOSE WHO AREN’T DECISIVE AND SAVVY, MORE SEVERE FINANCIAL PAIN IS AROUND THE CORNER.
The harsh reality is that you may not be as prepared as you think, even though you have a sizable “nest egg.” If you’re relying on your traditional IRA/401(k) to supplement your Social Security benefits and maybe even pension, be prepared to have taxes erode away your cash.
Over the last 12 months I’ve taught educational series and webinars for thousands of individuals, families, and businesses. Not once has anyone ever disagreed that future taxes WILL BE HIGHER than they are now.
With taxes on the rise, I look for every valid and legal way to maximize my income and minimize my taxes. I’d rather redirect my money for vacations, grandchildren, and causes that I support, than give that cash to the government in unnecessary taxes. I’m sure you’re the same.
MONEY FOR UNCLE SAM … OR YOU?
You may not realize that when you reach retirement, you may lose many of the deductions you once enjoyed, such as home mortgage interest, dependents, and retirement plan contributions. And if you’re a business owner, you’ll be losing even more deductions. Although you may have less income during retirement, your taxable income may be just as high or higher!
If you don’t take action to avoid paying excess tax, you’ll likely be in for a rather unwelcomed surprise during your retirement years, which could result in living a lower lifestyle, or outliving your money.
No matter how you look at it, paying less in taxes means keeping more for yourself. In our opinion, as part of your tax-reducing retirement strategy, you should take a serious look at MAX-FUNDED, TAX-ADVANTAGED (MFTA) INSURANCE CONTRACTS.1
When structured properly and funded correctly a MFTA Insurance Contract will knock the socks off any typical IRA or 401(k).
PROTECT YOURSELF FROM INCREASING TAXES
Along with their important death benefit, these contracts can be structured to hold your serious cash (by serious cash we mean money you have set aside for retirement). When structured correctly and funded properly, these contracts shelter you from the danger of increasing taxes.
Here is how a properly structured contract can shelter you from increased taxation:
Money put into these insurance contracts has already been taxed at today’s rates, not tomorrow’s. With tax rates likely going up in the future (to unknown amounts!), getting taxes over and done can be financially critical. Keep in mind, you’d always rather pay taxes on the seed money than the harvest money.
Money taken out of your contract—when done optimally, in accordance with Internal Revenue Code guidelines—is not regarded as taxable income, as opposed to income from a traditional IRA/401(k). You can also access your money tax-free using several methods. The smartest and best way to access your money from a max-funded, tax-advantaged insurance contract is via a loan, rather than a withdrawal.
Tax Savings #3
When done correctly, it is a loan made to yourself that is never due or payable in your lifetime. To be in compliance with IRS guidelines, an interest rate is typically charged, and then that interest is offset with interest that is credited on the money you didn’t “withdraw,” but rather remained there as collateral for your loan. This results in a zero net cost in many instances (2).
Loans taken from your contract ARE NOT TAXED, because they aren’t deemed earned, passive, or portfolio income—which are the only types of income that are subject to income tax on a 1040 tax return. See section 7702 of the Internal Revenue Code
“A maximum-funded tax-advantaged insurance strategy, when
structured properly and loans taken correctly, will not hit your tax
return. That is powerful.”
-Jim Whitehead, CPA
www.jimwhiteheadcpa.com