Tax-Free Retirement
WHAT IF YOU COULD:
-
Provide an income tax-free death benefit for the people who depend on you
-
Defer taxes as your accumulated cash value grows, and
-
Potentially access that cash value using income tax-free policy loans and withdrawals, to use for retirement income or other needs
Strategies to Save For Retirement
When you save on a before tax basis, such as a Traditional IRA, your contributions are tax deductible. The trade off is all income received is taxed as ordinary income.
If you make a withdrawal prior to age 59½ you may incur an additional 10% penalty. This leaves you exposed to potentially higher future tax rates.
​
If you believe taxes are going up this could be devastating to your retirement income. In this example, you are taxed on the harvest. On the tax-free side, in our example of a Roth IRA, the contributions, i.e., (the seeds), are taxed before they are deposited and both the contributions and earnings may be tax-exempt3, thereby insulating you from possible future tax rate increases.
After Tax Strategy
when you set aside a portion of your after tax income into an account earmarked for retirement. Taxes are paid annually on any earnings. An example of this type of savings is a Certificate of Deposit.
Tax-Deferred Strategy
when you set aside a portion of your after tax income for retirement, earnings on the account grow tax-deferred. When retirement income is taken, taxes are due on the tax-deferred gain. A Non-Deductible IRA or an annuity is an example of this type of savings.
Pre-Tax Strategy
Might include an Employer sponsored qualified plan, like a 401(k) plan. You don’t pay current taxes on contributions made to the plan and earnings grow tax-deferred. Later when you take retirement income the benefits are income taxable.
Tax-Free Strategy
Is similar to the Tax-Deferred Strategy: you set aside a portion of your after tax income, and earnings grow tax-deferred. Retirement income is received income tax-free. A Roth IRA is an example of this type of savings. Another type of financial vehicle is permanent life insurance.
