7702 Tax Free Retirement Plan
Did you know that long-term life insurance is considered the new certified retirement plan? I didn’t either till I came across an innovative product. Let me share some truths about standard certified retirement plans and how they compare to a correctly structured permanent life insurance policy. We are talking here about the 7702 tax free retirement plan.
A certified retirement plan according to the IRS includes 401K, individual retirement accounts (IRAs), pension and annuities. While the structures of these strategies are good, they are not the very best. Here are some known facts about retirement plans:
Retirement plan cost savings are accumulated tax deferred. The loan is tax deferred, have you ever believed about what tax bracket you will be in when you retire? More than likely it will be the same bracket you are presently in or a higher bracket because of the quantity of money you will have to withdraw regular monthly to preserve your lifestyle. Who wishes to pay more taxes when they retire? Not me.
Retirement plans have a maximum contribution quantity each year. Now let’s be clear that I am just speaking about retirement plans that you as the owner can add to. There are plans such as pensions and defined benefit strategies that only an employer can make the contribution to. A 401K has a $17,000 and individual retirement accounts (Individual Retirement Account) have a maximum $5,000 contribution limitation per year. What if you wish to conserve more?
Retirement plans have actually needed minimum circulation age. The Uncle Sam, wishing to keep his hand in your pockets as usual, needs that you need to start making withdrawals from your retirement plan by age 70 & 1/2, unless it is a Roth IRA. Whether you require the cash or not Uncle Sam requires you to receive regular circulations based upon an estimation they developed AND you have to pay taxes on it.
Retirement plans expense you early withdrawals fees and penalties. Now suppose you need the cash prior to you turn 59 & 1/2, do you believe you can take exactly what you desire with no issue? Nope. If you make a withdrawal before you are 59 & 1/2 you will not just have to pay tax, but likewise a 10% penalty cost. Isn’t it your cash?
Now let’s compare these exact same advantages of retirement plans to a long-term life insurance policy. Permanent life insurance policies include a money value account. This account is, in simple terms, a savings account that can be used as a retirement account. Did you understand that IRS code 7702 states that you can use a retirement account as a supplement pension? It is truly an amazing thing. Let’s compare.
Life insurance money accounts are accumulated tax-free. That’s right tax free. Because you pay your life insurance premium after tax, the cashes assigned to your money account are after tax. This implies that if when you decide to pull funds from your account, you will not have to report them to the Uncle Sam.
Life insurance money accounts have a higher maximum contribution limit. I would love to inform you that you can shelter any amount of cash you want in a life insurance policy but that is not the case. At one moment you in fact might do this but throughout the years the guidelines have actually changed. However, the great thing about this limit is that it is based upon the size of your policy and what does it cost? you contribute above your premium every year. As a result, this limit can be higher than the $17,000 maximum 401K limit.
Life insurance cash accounts can be withdrawn at any time. The money built up in a life insurance agreement can be secured at anytime. The secret is to withdraw these funds as a loan and not as a fundamental withdrawal. Why you ask? As a withdrawal, there is a possibility that you will have to pay taxes on the interest earned because account. However with a loan you will not have to pay any tax. In fact you won’t even need to pay the loan back. As long as the policy is current, the loan balance will remain. On the occasion that the funds have to be dispersed to the beneficiary, the loan balance will be subtracted from the payout quantity.
Life insurance cash accounts do not cost you additional costs. I just told you that you can take the money out tax free and now I am informing you that it is also charge free. You don’t even have to pay the interest on the loan, if you take the funds out as a loan like I informed you above, since the interest owned on the loan is balanced out by the interest made on the cash account.