“Nothing is certain except death and taxes,” wrote Ben Franklin. There are, however, some unknowns about taxes. For instance, we cannot predict years in advance what the top marginal tax rate will be when we retire and begin to withdraw funds from our tax-deferred retirement accounts.
In other words, the more money you have in tax-deferred accounts—such as a traditional IRA or retirement plans like a 401(k), 401(b), and 457—the more vulnerable your retirement money might be to changes in future tax rates.
The Problem With Traditional Retirement Funds
When you talk with financial planners, their focus is on the accumulation of wealth. They can help you grow your money with investment strategies—equities, mutual funds, real estate, and even 401(k) plans that include employer contributions. However, what they can’t do is guarantee your tax rate or capital gains at the time of distribution.
That should leave you with some concerns. Given that federal deficits have been ballooning, even before the massive rescue packages necessitated by Covid-19, it’s likely that taxes will have to increase to mitigate the national debt.
A Roth IRA or 401(k) may help defray taxes, but the limitations on contributions make it difficult to either accumulate or protect significant wealth.
Market volatility is another problem beyond the control of financial advisors. They cannot guarantee what markets will look like when you are ready to cash out your equities or sell your house. By the time you retire and need to withdraw money, we could just as likely be in a recession, or worse, a depression.
Taxes and market volatility are two headwinds that can lower the value of your wealth when you need it most.
A Solution Free from Taxation Worries
But before you despair, there is a potential solution to your wealth protection that you may not have considered. It’s whole life insurance.
Even if you are in your 50s, whole life insurance can give you greater peace of mind and financial control over your money when you retire.
With the help of Prevail Innovative Wealth Strategies, you may be able to mitigate some of the uncertainties surrounding future taxes, market volatility, and more.
The Power of a Life Insurance Retirement Plan (LIRP)
If you’ve ever given thought to whole life insurance or read articles on the pros and cons of whole and term life, you may believe that although whole life has some cash value benefits, it is more about the death benefit.
But with the proper planning, implementation, and servicing of a whole life policy, you can turn the benefits of whole life upside down and make the cash value component (rather than the death benefit) work for you during your retirement.
Here are some of the benefits you may not have considered:
- Whole life has a guaranteed interest rate plus dividends, which provide predictable growth and serve even during your accumulation years as a buffer against market volatility.
- Because withdrawals are tax-free, you have a predictable expectation for your retirement funds while still providing a tax-free death benefit component for your beneficiaries.
- You have greater liquidity and access to your money. With the right structuring and choice of plans, you can even pull money out of your life insurance account when the market is down and then replace it when the market goes back up. The insurance company will credit the same interest and dividends as if the money had been in the account the whole time.
- It is even possible to accelerate the death benefit to help cover your long-term care costs.
- A LIRP can mirror and mimic a 529 college savings plan, and with even greater flexibility.
- In many states, your whole life insurance is protected against any litigious activity.
How to Determine If This Is for You
Start by watching the video presentation, Prevail Over Uncertainty. You will see how whole life insurance can be made to work for you as a cash value asset, even if you are over 50.
Discover the range of benefits and flexibility of whole life when used as a cash value asset as part of your overall financial planning. You’ll likely still want to diversify your assets and take advantage of wealth accumulation vehicles, including equities, mutual funds, real estate, and retirement plans (especially employer contribution plans, which is free money for your retirement).
But with the help of an expert who knows how to structure whole life insurance as a cash value asset, you can get the greatest benefit from all your resources while mitigating some of the uncertainties otherwise facing you in retirement.
Finally, should you have concerns that you may not qualify for whole life insurance, you should know that the asset owner and the insured can be two different people, as long as there is an insurable interest. The owner controls the asset and the cash; the insured is the person who would receive the death benefit.
Are you in your 50s and concerned about protecting your wealth in retirement? If so, it may be time to explore the cash value and risk mitigation aspects of a carefully structured whole life insurance plan.
