You are probably familiar with one or two of these already but might not know about all six.
Do you have clients with money in IRA’s right now? Here are two reasons to consider moving those funds to a permanent life insurance policy:
1) Market risk – The stock market goes up and down, but when? Nobody knows. Index returns in a life insurance policy lock in gains with no exposure to downside losses when the market declines.
2) Taxes – Since clients receive a deduction for funds placed into an IRA, those funds (plus growth) will be taxed upon withdrawal. The larger the IRA, the greater the tax burden to your clients or their heirs. With an ever increasing national debt, taxes are likely to increase in the future. Plus, clients in their working years generally have deductions available now that they may not have in the future (mortgage interest, dependents).
Why not pay the taxes today when rates are at historic lows and their deductions may be at historic highs?
Who fits the ideal criteria for this concept?
Clients in their 60’s. They don’t need to worry about the 10% tax penalty for withdrawing qualified funds prior to age 59 1/2. You should stretch the withdrawals over 10 years if you can to reduce the annual taxes. As long as clients move the money prior to age 70 1/2, they will not need to worry about required minimum distributions. They will still have to pay taxes, but now they can pay when tax rates are at historic lows.
As a bonus, with no taxable retirement income, your clients won’t have to worry about their social security income becoming taxable.
During a client review you discover that your client has a life insurance policy that has accumulated cash value. However, you also see that loans have been taken from the policy to pay premiums or for funds for your client. Because the policy may not be performing as expected, the interest rate on the loan is a bit high and mortality costs have decreased…the policy is in danger of lapsing.
What do you do next?
Check out this quick video to learn more about the options available.