Tax Strategies

4 Types of Money

The Truth About Your Money and Retirement

1. Free Money

Includes gifts
Inheritance
Company match in retirement plan

Sounds great! The best type of money is Free...the more the better. Be careful not to contribute more than your employer match or you might skip over the next best type of investment money...

2. Tax Free Money

Municipal Bond
Roth IRA
Life Insurance

No taxes due on the income from the items in this category. There are drawbacks... Municipal Bonds over time may not provide enough diversification or return to build a retirement nest egg. Roth IRA's have participating income and distribution limits. Life insurance can work like the Roth without the age restrictions or contribution limits. (must use a properly structured life insurance plan) the next best type of investment money...

3. Tax Deferred Money

Tax Qualified Plan
IRA
401(k)

The most common of all categories of investment money. The majority of people mistakenly skip #2 on our list and have their assets invested in tax qualified retirement accounts. (401(k)/IRA)

Important to remember: Money invested in this type of account does not avoid tax, just delays tax, essentially compounding the amount due when finally withdrawn.

4. Taxable Money

Just about everything else is taxable
No tax breaks now or in the future

Simply put, there will be 2 pools of money available to us in retirement: Taxable and Tax-Free

Which pool would you like to have your money in?

National Debt

Also consider our national debt. How are we going to pay this growing amount? Generally, governments increase their revenue by spending less (not a good job at it so far) and/or raising taxes. (probable, given our historically low current tax rate)

So, given that tax rates will probably increase in the future, let me ask you, "Would you rather defer paying lower taxes now to pay much more in taxes at a future date?"

Most, if not all would say, "Pay Now."

Tax Free Strategies

There are Tax-Free strategies available for most individuals. Some of the most beneficial are

Tax Free Retirement for Business Owners
Tax Free Retirement for Physicians
Tax Free Retirement for Children and Grandchildren
Tax Free Retirement for High Income Earners
Tax Free Retirement for Everyone else contributing to a Tax Qualified Retirement Plan

* Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company 1690455-0621

** Although an external index or indexes may affect contract values, the insurance strategy/contract does not directly participate in any stock or equity investments. You are not buying shares of any stock or index. The interest credited is limited by either placing a cap on the amount of interest that can be earned (“cap” rate) and/or requiring a specified rate that must be surpassed within the index before interest will be credited (“spread rate”). The interest credited on your contract may be affected by the performance of an external index. . You are not buying shares in an index. The index value does not include the dividends paid on equity investments underlying the equity index or the interest paid on any fixed income investments underlying any bond index. These dividends and interest are not reflected in the interest credited to your contract.

These concepts represent our current understanding of the law in general and are not to be considered legal or tax advice. Income, estate, gift and generation skipping tax rules are subject to change at any time. This is not an attempt to give legal or tax advice. You should consult with your legal or tax advisor regarding your individual situation before making any tax related decisions.