Did you know that permanent life insurance is considered the new qualified retirement plan? I didn’t either until I came across a revolutionary product. Let me share some facts about traditional qualified retirement plans and how they compare to a properly structured permanent life insurance policy.
A qualified retirement plan according to the IRS includes 401K, individual retirement accounts (IRAs), pension plans and annuities. While the structures of these plans are good, they are not the best. Here are some known facts about retirement plans:
Retirement plan savings are accumulated tax deferred. Although the money is tax deferred, have you ever thought about what tax bracket you will be in when you retire? More than likely it will be the same bracket you are currently in or a higher bracket because of the amount of money you will need to withdraw monthly to maintain your lifestyle. Who wants to pay more taxes when they retire? Not me.
Retirement plans have a maximum contribution amount per year. Now let’s be clear that I am only speaking about retirement plans that you as the owner can contribute to. There are plans such as pensions and defined benefit plans that only an employer can make the contribution to. A 401K has a $17,000 and individual retirement accounts (IRA) have a maximum $5,000 contribution limit per year. What if you want to save more?
Retirement plans have required minimum distribution age. The Uncle Sam, wanting to keep his hand in your pockets as usual, requires that you must start making withdrawals from your retirement plan by age 70 Â½, unless it is a Roth IRA. Whether you need the money or not Uncle Sam forces you to receive regular distributions based on a calculation they came up with AND you have to pay taxes on it.
Retirement plans cost you early withdrawals fees and penalties. Now suppose you need the money before you turn 59 Â½, do you think you can take what you want with no problem? Nope. If you make a withdrawal before you are 59 Â½ you will not only have to pay tax, but also a 10% penalty fee. But isn’t it your money?
Now let’s compare these same benefits of retirement plans to a permanent life insurance policy. Permanent life insurance policies include a cash value account. This account is, in simple terms, a savings account that can be used as a retirement account. Did you know that IRS code 7702 states that you can use a retirement account as a supplement retirement account? It is truly an amazing thing. Let’s compare.
Life insurance cash accounts are accumulated tax-free. That’s right tax free. Since you pay your life insurance premium after tax, the monies allocated to your cash account are after tax. This means that if and when you decide to pull funds out of your account, you will not have to report them to the Uncle Sam.
Life insurance cash accounts have a higher maximum contribution limit. I would love to tell you that you can shelter any amount of money you want in a life insurance policy but that is no longer the case. At one point in time you in fact could do this but over the years the rules have changed. However, the great thing about this limit is that it is based on the size of your policy and how much 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 cash accumulated in a life insurance contract can be taken out at anytime. The key is to withdraw these funds as a loan and not as a basic withdrawal. Why you ask? As a withdrawal, there is a possibility that you will have to pay taxes on the interest earned in that account. But with a loan you will not have to pay any tax. In fact you won’t even have to pay the loan back. As long as the policy is current, the loan balance will remain. In the event that the funds have to be distributed to the beneficiary, the loan balance will be deducted from the payout amount.
Life insurance cash accounts do not cost you additional fees. I just told you that you can take the money out tax free and now I am telling you that it is also penalty free. You don’t even have to pay the interest on the loan, if you take the funds out as a loan like I told you above, because the interest owned on the loan is offset by the interest earned on the cash account.
To receive your free audio CD and learn more about how to create, build or maintain a financially thriving business, visit www.Empower2Thrive.com/optinSherrell Martin is a licensed life insurance provider in the State of Maryland.
Article Source: EzineArticles.com/expert/Sherrell_T._Martin/1382292
This video demonstrates the power of having a tax free retirement using the IUL strategy. Applied knowledge empowers you to advance with achieving your financial goals. Contact the licensed agent whom shared this powerful message and apply the knowledge you learned.