Sales Idea 19 – Two Reasons to Move IRA Funds to Permanent Life Insurance

Two Reasons to Move IRA Funds to Permanent Life Insurance
Two Reasons to Move IRA Funds to Permanent Life Insurance
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.

Relieve your Clients’ Policy Loan Burden

Stop me if you’ve heard this one before…

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.

Underwriting with Andrea #6

Declines got you down?
Underwriting is both an Art and a Science. Here at Financial Brokerage we know that the clients you protect have their own unique histories that often present Underwriting challenges. With so many options available, knowing where to start can be daunting. Let us help you choose the right carrier the first time. Stop Declines before they happen and contact me the next time you’ve “got a guy” that you’re not quite sure where to start with. You might just be surprised at what I’ll find…
Today’s Challenge
Today’s client is one of 5 siblings and the only child born with Achondroplasia. Male, age 51, in good health other than blood pressure controlled with medication. The client has two children of his own, one born with dwarfism and one born of average height. Some of the more common concerns with dwarfism include difficulty breathing during sleep (sleep apnea), pressure on the spinal cord at the base of the skull, progressive severe hunching or swaying of the back with back pain or problems breathing, narrowing of the channel in the lower spine (spinal stenosis) resulting in pressure on the spinal cord and subsequent pain or numbness in the legs, arthritis, etc…

The Resolution
Due to the known risk factors there were unfortunately multiple carriers that were unwilling to even look at this risk and opted to decline without reviewing any portion of the clients medical history. However, as has been proven time and again, shopping this out worked to everyone’s advantage because there were at least 4 carriers that were happy to look at the big picture. Two of our leading carriers indicated that Standard (at best) might be possible. One carrier was a tad more guarded and indicated that this would need to be reviewed by a medical director but they were fairly certain that an offer could be made. I was pleased to see that coverage was at least possible but nothing made me happier than the carrier that indicated Preferred Plus was possible! Of course this tentative offer was subject to an acceptable BMI, no complications from achondroplasia, and the client had to be fully ambulatory without the need for walking aids, but Preferred Plus NT when most other carriers wouldn’t even consider-That’s a big win in my book!

Taxes Are On Sale! Three Ways to Take Advantage

The Tax Cuts and Jobs Act of 2017 lowered Federal income tax rates for most Americans. Even though these rates are historically low, how long will they last? Deficits have increased under the current Congress and the National Debt continues out of control. The Tax Cuts and Jobs Act only made the problem worse. A future Congress will need to raise taxes at some point to address the issue. In fact, the current Congress actually built a tax increase into the new law! These tax cuts for individuals expire in 2027.

What does that mean for you and your clients? You have a short window of opportunity to help them take advantage of today’s low rates. In this quick video, I explain how TAX-FREE income from Index Universal Life can help three different types of clients. We will explore how you can help young professionals, pre-retirees and established retirees take advantage of today’s historically low Federal income tax rates.

Taxes are on sale right now

Three life insurance sales ideas to help your client take advantage before it is too late

Federal income taxes are on sale right now

2018 Federal income taxes are historically low. Between 1932 and 1986 the top income tax rates were usually above 70%, even spending 15 years above 90%! Rates have been considerably lower for the past three decades. The new tax law (The Tax Cuts and Jobs Act) lowered rates yet again.

Why these low rates can’t last

Congress built increases into the new law. Due to the method Congress used to pass the bill, the individual tax cuts fade over time and become net tax increases starting in 2027. Deficits are predicted to top $1 trillion in 2023 and the National Debt is expected to exceed $33 trillion in 2028.

At some point the additional debt caused by the current Congress will need to be paid. Federal revenue will need to increase to handle this problem. If your clients were hoping for a lower tax bracket in retirement, they might want to rethink that strategy.

How can life insurance help clients take advantage of this low tax window?

It makes sense to pay taxes now and not in the future when they will likely rise. Your clients need a retirement plan that can help them do that. They only have a few choices available, including life insurance, Roth IRA’s and Roth 401(k)’s. The Roth options include limitations not found with life insurance products. Life insurance is unique in that money inside a policy is not subject to current or future taxation is structured and distributed correctly. The Federal government places no age restrictions on access to this money.

Sales Ideas for Young Professionals

Your clients should place their retirement contributions into an index universal life policy to take advantage of the tax treatment listed above. This age group likely does not need extra deductions today as they qualify for several already (mortgage interest, student loans, deductions credits for children). Additionally, due to the arbitrage power of variable loans, index life insurance contracts should out-perform traditional options. The index accounts shield money from downside market risk while allowing for upside growth.

Sales Idea for Pre-Retirees

Most of your clients 10-15 years away from retirement did the popular thing and placed their retirement money into Qualified plans. Since they must pay taxes on this money at some point, why not begin paying taxes on some of this money now? If they delay, both the accounts and tax liability will increase. These clients can cap their taxes today and still enjoy growth. If they are already over 59 ½ they can begin withdrawals from their qualified plans immediately. Withdrawals should be staggered over several years to lessen the annual income tax. If they are below 59 ½ they will need to follow 72(t) rules and take no more than a calculated amount each year to avoid the 10% penalty tax.

Sales Idea for Established Retirees

Some of your retired clients have money they will not spend during their lifetimes. These dollars are earmarked for future generations but are not in the most effective vehicles for that purpose. The money is probably in bank savings accounts, CD’s or even annuities earning low rates of return. You could move the dollars into a wealth transfer index life policy for greater leverage. Your retired clients do not have the life expectancy to grow the asset to an amount equal to the death benefit after taxes. If the vehicle is tax-deferred or tax-qualified, why not pay the taxes at today’s low rates? They could save their heirs unnecessary taxes. When these clients pass away qualified assets will likely pass to adult children during their peak income earning years. They should lock in this tax expense at a low rate today and enjoy a 100% tax-free benefit in the future. An index product eliminates downside risk while allowing for growth as cash values increase.