life insurance retirement planning

 where are taxes going in the future no one knows except based on the fact that our country has today we believe that tax rates can only go up and if you look back at the history of tax rates it showed from 1997 to 2016 and 44% of the Equity Fund investor gains or losses so they can do an extremely important for capital gains rates going up examples of traditional IRA example of 39.4

The concept that works for the majority of our clients and therefore maybe that's not the best bucket to say that by no means does it mean you shouldn't say that but maybe we look at the other buckets the non-qualified bucket in the life insurance as a retirement plan but it hasn't none other mechanisms are ways to save for retirement where are taxes going in the future no one knows except based on the fact that our country has today but we believe that tax rates can only go up and if you look back at the history we see tax rate today increase their capital gains rates going this is another concern the study done by the mutual fund tracker Lipper it showed from 1997 to 2000 and 7:15 16 and 44% of the typical Equity Fund investor gains or loss the taxes so they figure they make a cherry considered or were concerned about the tax ramifications of making an investment into a mutual fund that shocking that you're giving up a significant portion of game because of taxes managing money in a tax-efficient manner is extremely important again looking at this chart it's scary to see you there or at a low rate for capital gains and likelihood of capital gains rates going up is high diversification as we've already discussed increase here's our pockets again we've got money on the left the bucket which is in a qualified retirement plan examples of batter 401K plans and pension plans traditional IRAs and those dollars are going to be taxed as income tax rates up on distribution so if we have an example of someone that can have 39% 39.6 federal tax rate of 6.6 state tax in the 3.8% Affordable Care Act at about a 50% so on every withdrawal you're taking out in the future if you're qualified plan your giving $0.50 of it to the government to tax is there for $100,000 withdrawal that you $50,000 of spendable money you have dollars and they said metal bucket which is outside of a qualified plan whether it's real estate or stocks font you're going to pay taxes at capital gains rate typically those are all there generally down there for today at the 20% Federal in the 6.6 state taxes taxes most people forget about on their to come there capital gains you do paste a different state tax in the 3.8 fordable Care Act that she has a 30.4% tax so if you take $100,000 out of that account you pay the taxes you're left with $69,600 if you put money into some of the asset classes that we believe are overlooked more often like a municipal Bond a Roth IRA or a life insurance as a retirement plan generally those dollars are going to grow tax-free and come out there for $100,000 I mean $100,000 of spending money so let's dig deeper into life insurance and talk about how a life insurance policy is structured and worked a few types of life insurance you have term insurance and permanent insurance term insurance is used epically for death benefit at a very inexpensive cost I equated to your auto insurance it's a use-it-or-lose-it insurance to pay your premium there's a death benefit for your beneficiaries if you die prematurely than a beneficiary receive a lump-sum check from an insurance company if nothing happens to your premium is gone the insurance company does not refund your premiums back to you Hartman Insurance builds up cash value in it and has a death benefit that pays a beneficiary on a premature death but it also builds up cash inside of it how it builds up cash is what makes life insurance different from each other so we're going to cover a couple of these and how they work which is what you have whole life insurance whole life insurance build cash because of insurance company returns a dividend to the shareholder or the policyholder I should say and that policy cause you have no control over the dividend or what the insurance company is going to return as a dividend and typically you've got no flexibility and how much you're going to pay the premium what you set out in a schedule at the premium you need to follow I have no idea what dividend rate you're going to achieve because Dividends are not guaranteed but the return of a highly rated corporate bond money inside of permanent policy as mentioned is going to grow on a tax-deferred basis when you take the money out you can pull the money out on a tax-free basis if you do it properly through withdrawals The second type of universal life insurance universal life insurance the insurance company pay your premium they returned the interest rate on a credit the interest rate paid 8 cash value in the policy against something you don't have control over typically their returns are going to be similar to whole life insurance policies and you're going to have a little bit more flexibility in this policy in terms of how you pay premiums and flexibility above when you make those premiums were his whole life to have less flexibility there's index universal life insurance this is becoming very popular product out there we're going to dig deeper into this because this is a product we believe give you some options index universal life insurance allows the insured to have a death benefit pay a premium and the premium is going to grow and how it's going to grow as the insured is going to or the policy owner is going to relax from a different set of buckets of money that are tied to indexes make it select from the various indexes with some caveats so if it's the S&P 500 Index if they want to mirror they would get the return of the S&P 500 with a caveat of if the S&P drops below zero your account value would get credited 0 if the S&P 500 goes up above a certain amount whether that 11 or 12% you would be capped at that so you have a 4 on the bottom side but I caps on the upside but you get the allocated into whatever the various insurance companies offer in terms of index buckets if you get to participate on the outside of those but you don't to an extent but you don't participate on the downside of that index has become more popular type of the product because you've got lots of flexibility and when you can make premiums but she gets ability to have different types of indexes that you can mirror and get that exposure to returns that aren't controlled directly by the insurance company all their options variable life insurance variable life insurance has some accounts associated with a Sonos sub accounts if those are mutual funds and you as the policyholder or policy owner or insured select from a list of mutual funds think of it like a 401k plan where you pick from a number of different mutual funds however those underlying investments before up or down is how your account value your cash value in your insurance contract is determined in 2008 as an example when the markets in the General market the global market for really down significantly your investment in a variable Life Church cut that would have been down significantly see you participate on the downside so you've got the flexibility of Select Investments but you also accept the risk associated with those and other private placement life insurance contract allows for someone to put in a life insurance wrapper around an investment account and those investment accounts are managed in a manner that independent investment managers can elect whether they use private Equity Funds or headphones I can use lots of different different types but the issue is that there are specific requirements that you must meet a certain threshold a requirement premium to these types of contracts sometimes 5 million dollars of assets 4 million dollars of Premium billing in so stupidly not a tool that utilize on a as often basis as the other four options so let's look at the Spectrum here that you'll see which gives you an idea of what the right way more conservatively to more aggressive over on the left you'll see that you know your traditional CDs and savings account for that that VIP Insurance are over on the left more safe secure types of Investments she get into some permanent life insurance like traditional whole life and universal life their guarantees come from the insurance company so that they are behind and got index universal life in the middle Berry move over to the right you can see you got variable life insurance where you're getting more upside potential but more downside downside risk as well then the individual stock so you look at this Rick Spectrum the left and conservatives in the right thing more aggressive when we talk about why I want to get it into a more specific examples here the ability returns Market light returns to an extent and a participating in all the outside of it but most companies offer a number of different options but you can the account that 1 year index in bucket you can use their 2 year and that's about it those two that just means from 4 1 year old 1 from 12 month period time you're participating whatever that index does for that 12 months 2 years you're participating whatever it does for that 2 year period 5 year means you can say whatever that index does for a five-year period of time universal life insurance policy only good thing about it is that they can offer some transparency and how it's designed as a charge structure is set up so you can maximize the growth you've got incredible flexibility and contributions you can add additional Riders to the policy is that allowed for the premiums to be paid by the insurance company if someone has disabled their long-term care benefit riders that can be used for critical care illness riders that can be added on to these types of products which of these products even more beneficial than they have in the past these are not your father's or grandfather's life insurance products anymore these are products that are more sophisticated and have been designed and built to work in today's economic environment and indexing and how often index in return can beginning as a concept and how this works if you have a investment and percent in your 1 and lost 10% here too and you did that over this 11 year period of time you would think over 5 years and $5 5 up 10 5 down here ever to return would be 0 so you can see how your actual rate of return is -4 percent if we could just eliminate those down here so we take away all the negative down years and we purchased it just say up yours back index seeing index universal life look what this does the returned it take away all those -10 to participate and just be 5 up yours your actual return to 61 year average is still 0 right 5 up 10:05 down 10 but you have a 0 return in the down here she get a 61% return over the same period of time another illustration of this is look at what has occurred since 2000 we have the S&P 500 and you made it $1,000 investment and you put it into the S&P 500 with dividends account would have been 1800 and $4 at the end of 2013 without that you would have $1,399 for of 0 and a cap of 12 that account would have $2,294 in it pretty powerful slide to look at now how do you find cash value life insurance there's a number of different ways to find cash value life insurance number one you can find it with after-tax dollars very simple to put in place to take out your tax dollars to fund it into a life insurance contract it has matching clothes tax-free comes out text previous loans and withdrawals and Loans doing it properly structuring structuring that is very important there other tools out there you can use section 79 benefit plan this just gives some kind of tax benefit if you utilize this tool there are restrictions and requirements on this and there's less flexibility on their tool as well you also can use exit 162 bonus plans this is how an employer can make contributions on behalf of the employees they cannot be scheduled to go way to recognize employees when doing them use it as a non-qualified Deferred Compensation Plan this is another way that allows you to put money away using salary deferral it is the employers deferring the tax deduction to a future date in a great way to recognize cam pulleys as well split dollar is another tool for funding life insurance a way that you can make a loan from a next to your corporation to someone or two and two and then to a trust that trust and then find the life insurance policy that we paid back the loan at a point time in the future to create way for businesses to minimize tax impact on the business premium financing this is where you utilize borrowed money to make the fund contributions certainly becoming more popular to of recent however this is a tool that is needs to have a clear understanding so this this tool because interest rates are low now make some sense for clients but it makes sense for clients in afford to pay the premiums there's no such thing as a free lunch in there for those that would be telling you to utilize premium financing cuz it's for insurance is just not an accurate statement so let's just go to 1 last example here on a 45 year old and will 45 year old that was going to contribute $50,000 a year for 10 years and then they wanted to take distributions from 865 for a 20-year period of time or something this individual is in the 39.6% federal tax rate was 5% States the Affordable Care Act of 3.8 % we're going to show the comparison of the right side if you put that money into a qualified retirement plan how much did you take out to put it into a non-qualified plan how much you can take out and if you put it into a life insurance cash value life insurance plan how much you can take out we're going to 6 and a half percent rate of return for all of them and we're going to end assume a 1% management fee and you can see on the right a qualified plan based on a set of assumptions could distribute out $47,945 a year for that 20 year period. He's not a qualified investment stop stocks Equity types investment would give you $54,943 for the light to turn to distribute out $78,339 for 1.5 million vs 1.1 million 400 / $400,000 and provement utilizing the life insurance 36 / $600,000 improvement from a qualified retirement plan she can see just based on the economic life insurance as a retirement plan and as part of an overall portfolio economics what are next steps we would encourage everyone to do an initial consultation with you no obligation no cost talk about your particular situation we can help you however as a diversified Financial Planning and consulting firm work with you and be a resource to you we can talk about this particular tool and your overall plan options make sure you would be happy to do thattoww.comtimetodayiappreciateit