retirement income strategies

How to Protect Your Retirement Savings

When it comes to financial planning, we all have one end goal in mind. That’s retirement. If you’re concerned about whether or not you’re going to be able to reach your retirement goals, no matter your age, this is for you. In this blog post, we will talk about the roadblocks that could be holding you back from reaching your retirement goals.

For the past thirty seven years as a financial services professional, when people come to us with their yet to be taxed IRA or 401K statements, they are generally shocked when they find out how much they have to pay in taxes.

Why is that so? It is because that’s not what they were told throughout their whole working career. They were told that during retirement, they would be in a lower tax bracket, but that’s not the case. You may be wondering why?

It was as if they were traveling down this road towards retirement with one foot on the gas pedal and one foot on the brake. They were setting aside as much money as they possibly could into their IRA or 401k or 403B, that’s the foot on the gas pedal. At the same time they were paying down their mortgage while watching their kids grow up and leave home. They lose those deductions by the time they reach retirement. They just can’t defer income into the future and eventually they lose those deductions. That’s the other foot on the brake.

If you’re traveling down a road with one foot on the gas pedal and the other on the brakes, are you making any progress?

Aside from losing all of your deductions, there is this ever changing tax code that we have to consider. There’s this old saying in Washington, “If you’re not at the table in Washington, you’re on the menu”. When’s the last time you were at the table in Washington? As for me, I’ve never been there.

Our country has $29 trillion in debt. Clearly we have a problem. But every time they meet in Washington and pass a new bill, it seems like they just keep on increasing spending like a drunken sailor. Now let me ask you this. If you have a spending problem or a debt problem, does it make sense to increase spending? If they’re not going to address the issue, then there’s only two ways the government could respond to try to fix this problem.

* Legislatively. They will increase taxes. How will this affect your retirement?
* Administratively. They can print more money and when they do, it results in inflation. What does inflation do to the value of your savings in retirement?

We call inflation the stealth tax. It subtly eats away the buying power of  money. You don’t even realize it most of the time but this is what inflation is doing to our cash value. Right now in 2022, it is blatant what inflation is doing to our money. But we don’t realize that the value of the dollar is decreasing little by little over time. The moment we get to retirement, it’s also very blatant that the buying power of our dollar is ever decreasing due to inflation.

When people come to us with their yet to be taxed retirement plans astounded as to how much they have to pay in taxes, when we haven’t even addressed the inflation issue, what are our options? Many don’t realize that after you earn your income and you pay your tax, whether or not you pay tax again on that money, the rest of your life is optional. It’s voluntary. The key is knowing what your choices are up front.

Whether you are in Gen Z or a Baby Boomer, or in any generation in between, you have two options on how to save for your retirement.

Strategy A
Take a tax deduction on a small amount of your cash value today and anticipate that it grows into a bigger amount in the future knowing that the government could tax at any rate when necessary just to solve the inflation issue.

Strategy B
Pay tax at a small amount of your cash value today and put it in a place where the government could never touch it ever again. So when you get to retirement you can be in control of how much tax you actually pay.

Which strategy would benefit you and your family more? Strategy A or Strategy B?

It is our mission to help as many families as possible, make the best financial decisions that would benefit them. That’s why we present you with these strategies because we believe that it is more beneficial to pay a small amount of tax on the small amount of income, rather than deferring it into the unknown future.

If you are ready to learn how to utilize these strategies to work for you in your specific situations, schedule your free strategy session today

Remember it’s not how much money you make, it’s how much you keep that really matters.

Qualified Plans: The Hidden Truth

These are not tax savings plans but
rather tax deferred savings plans. The government did not say that you don’t have to pay taxes…

 

For many people, the term 401k is synonymous with retirement preparation, and sometimes represents the full extent of
their preparedness. Such accounts are often included as part of a benefits package provided by employers, and chances
are if you have one, most of your retirement savings are being deposited into this account. Given that it can play such a
prominent role in our financial picture, it is imperative that you fully understand exactly how these plans work.

So what do Qualified Plans do exactly?

Most people will be familiar with the fact that they defer taxes, which is true. But this term “defer” can often lead to a
misunderstanding about what is actually happening. Some people fall victim to the misconception that “deferred” taxes are
taxes they are “saving” because the taxes do not have to be paid; which is not true. These are not tax savings plans but
rather tax deferred savings plans. The government did not say that you don’t have to pay taxes on the dollars in your
Qualified Plan; they said that you don’t have to pay the taxes now.

If not now, then when?

Well, later obviously. The key difference between now and later though is relative to your tax
bracket. What bracket you are in now, and what bracket you will be in when you decide to take the money out of the
account. If you defer the tax and you are in a higher bracket later than you are in today your share of the account will be
less. If you are in a lower bracket when you take the money than when you put it in you will get more. The IRS is not
going to ask you what tax bracket you were in the day you made the contribution to your account. Their only concern is
going to be what tax bracket are you in at the time of withdrawal. Because this is true you will need to make an informed
decision about which option is best for you.

The Check Story

“Let’s assume that you call me one day and want to borrow $10,000. I hand you the check, but before you take it you are
going to ask me two questions. The first is how much interest am I going to charge you, and the second is when do you
have to pay it back?

Suppose I said to you, I am doing fine right now and do not need the money, but there will come a day when I need it, and
when I know how much I need we can figure out how much interest I need to charge you to get how much I need.”
Would you cash that check? Probably not, but you are standing in line to do exactly that with the federal government in
your qualified plan. They did not say that you don’t owe the tax; they said you can pay us later. At what rate? Now that is
a good question.

Understand that Qualified Plans do two things:

1. They defer the tax, AND
2. They defer the tax calculation

Ultimately, the impact these plans can have on your finances either positively or negatively, depends on a number of
factors. The first and most fundamental of these is your understanding of the rules of the game, and secondarily the
strategy you use to play the game.

Tic-Tac-Toe

You may not remember the first time you played tic-tac-toe, but you can probably guess who won. It was likely the person
who showed you how to play the game. The game has only a few simple rules, one is the X, the other O, three in a row
wins. As we first learned this game as children, we lost routinely until we learned the strategy of the game. If you have
dollars in a Qualified Plan, you are already playing the game. As an advisor, my job is is helping clients employ a winning
strategy by better understanding the rules of the game.

How much should you contribute to your retirement plan?

 

How much should I contribute to my retirement plan? Conventional wisdom tells us that from the day we start working, to the day we retire, we should maximize contributions to our qualified retirement plans. Traditional retirement plans leave your money inaccessible and out of your control. Your goal should be to save in a tool that you can control. This video provides a closer look at retirement plans, and whether or not they are suitable for you and your needs.

 

“Another thing to keep in mind with retirement plans is that they’re often invested in the stock market and there’s no guaranteed that when you go to retire, your savings is going to be intact. “

 

Have you ever wondered how much you should be contributing to your retirement plan or 401k? Traditional qualified retirement plans leave your money inaccessible and out of your control. If your goal is to regain control of your money, then perhaps you should consider saving money in a place that’s safe and allows you access to your cash for things like cars, vacation, tuition, home renovation, and any other purchases, whether planned or unexpected.

When all your money is tied up in retirement plans, you’re at the mercy of the government, wall street and the banks. Let me give you an example. We were introduced to a client who had $1.4 million in a 401k plan. He wanted to take his family on vacation to Disney, but he couldn’t put his hands on $13,000 in order to do so. On paper, this man was a millionaire, but the reality of it was he couldn’t put his hands on $13,000 to take his family on vacation because he didn’t have access to his cash.

The point of the story is it’s not a bad idea to save for retirement. In fact, it’s a very good idea. However, it’s also important to save in a tool that you control, somewhere that’s flexible and allows you access to cash. Another thing to keep in mind with retirement plans is that they’re often invested in the stock market and there’s no guaranteed that when you go to retire, your savings is going to be intact.

People view their retirement plans as savings, but there’s a big difference between savings and investing. Savings should be money that’s accessible and safe. Conventional wisdom tells us that we’ll be in a lower tax bracket when we retire, but taxes is another area in regards to retirement plans that we don’t control. We may be in a lower tax bracket; we may be in a higher tax bracket. The fact of the matter is nobody knows but think about this. You’re deferring taxes into the future of the unknown. It’s like driving a car off the lot, not knowing what the final purchase price is. Would you do that? Most people wouldn’t, but yet every day we fund our retirement plans not knowing what the future cost is going to be to get our own money.In conclusion by maximizing our retirement plan contributions, our money is inaccessible and because our money in accessible, we have to go to banks and credit companies to finance the things of life. Additionally, we’re deferring taxes into an unknown future.

 

Are you too old to start using the infinite banking concept?

 

 

“The best time to plant a tree was 20 years ago. The second-best time is now.”     – Chinese Proverb

Do you find yourself wondering if you’re too old to start using the infinite banking concept? Well, unless you’re done buying things, you’re not too old to start. What you’re really wondering is whether or not the cost of insurance is going to be too high for you. While this is inevitable once you reach a certain age, this video will analyze just what that means and why it isn’t a bad thing.

You can’t regain control of your cash flow unless you control the banking function.”

 

Are you too old to start a policy to use for the infinite banking concept? We get asked this question every day and it’s really relative. People in their forties say, I should have started this 20 years ago. People in their sixties say, I should have started this 30-40 years ago. Well, the fact of the matter is, unless you’re done buying things, you’re not too old to start using the infinite banking concept. Why? Because the infinite banking concept puts you in control of your money. It eliminates the banks and puts you in control, meaning that you make the profits that the banks would have made. It’s like the old ancient Chinese proverb. The best time to plant a tree was 20 years ago, but the second-best time is today, so therefore you’re never too old to start the infinite banking concept.

When someone comes to us and asks if they’re too old to start an IBC policy, what they’re really asking is, is the cost of insurance too high for me? They associate being older with a higher cost of insurance, which is absolutely correct. Understand this, yes, the older person is going to pay more per thousand of life insurance coverage than the younger person. There’s no way around that. However, because that person is older, the insurance company has to reserve more money sooner in order to make sure that they’re able to pay the claim. So those two issues cancel each other out. The higher premium is canceled out with a higher reserve, which by the way, infinite banking is all about the reserve or the cash value.

There’s a third piece going on that makes infinite banking actually more attractive for older people and that is the fact that they’re more likely to die. Because they’re more likely to die, there’s a probability that the cashflow management tool that you use to buy things is now going to pay off in a tax-free death benefit. Think of it this way, the life insurance company reserves more for an older person. They’re willing to pay more to the older person to surrender their policy. Let’s look at a practical example that’s comparing insurance policy’s on Olivia and me. So, Olivia’s 29 and I’m 57, let’s say we wanted to buy $50,000 of insurance paid up at age 100. The premium for Olivia is going to be much lower than the premium for me, but the amount that the insurance company has to reserve for every annual that’s paid is going to be greater for me than it will be for her. Why? Because they have 71 years to reserve for Olivia and only 43 years to reserve for me.

Let’s take a look at how Nelson Nash, the author of Becoming Your Own Banker, addressed the very question. Am I too old to start this? Nelson Nash was 52 years old when he discovered this concept and his situation was such that he was buried in debt and he was looking for a solution to the problem that he had created for himself with the banks at that time. He also knew that he was paying state farm insurance company about $400 per year on a whole life insurance policy. His cash value was growing by over $800 per year. It was then that he realized the solution to his problem. He needed to get his premiums as large as his mortgage. If he did, he’d be in a great position financially. It was at that point that he started to get as much insurance as he can on himself, his family members and anybody else whom he had an insurable interest. At one point he had over 44 life insurance policies.

You see, Nelson knew that owning cash value in those policies was as close as he could get to owning his own bank. Life insurance is not an investment, but it is a vehicle that you can use to become your own bank. It is a vehicle that you can use to manage your cash flows and pay the profits that you would a bank back to yourself. It took 14 years to get rid of the need for a bank in his life. After those 14 years, he borrowed against the cash value in his life insurance policies and never needed to borrow from a bank again.

Remember, life insurance is not an investment, but it is a great tool to be used to become your own bank. It is a great cash management tool where you can manage your cash flows to rid yourself of the need and the control that banks put on us. Basically the question is, do you want to be controlled by the banks or do you want to be in control of the banking function? You can’t regain control of your cash flow unless you control the banking function. Either you control the banking or the banks control you.Whole life insurance is the ideal cashflow management tool.

Let me give you a practical example. We have clients that started a business 20 years ago. At that time, they borrowed $2 million to capitalize their business. They use that capital to generate profits. They used the profits to pay back the loan. 10 years after they started the business, the loan was paid off and they decided to expand their business. They went back to the bank to borrow another $2 million, but the question becomes, whose money did the bank give them for the second loan? The bank gave them back their $2 million and charged them interest and a fee to do so.

They were not in control of the process, but understand with infinite banking, you are in control of the process and therefore in control of the profits. They broke the debt cycle which was borrow from a bank, capitalize their business, generate profits, and then use those profits to pay back loans. Now they’re borrowing against their cash value, capitalizing their business, generating profits and using those profits to pay back to their policy, their bank to generate profits for themselves.

In conclusion, you’re never too old to start using the infinite banking concept. You may not be able to get a policy on yourself, but there are certainly people in your life who you could insure, and you could own that policy and control the cash flow in that policy.

How to navigate the current economic downturn.

 

Were you prepared for an economic downturn? Given the current situation, many people were not financially prepared for the effects of Covid-19. Whether you’ve been laid off or are now working from home, most people are struggling financially. You may have a few options when it comes to accessing some of your invested money. You can take money out of your retirement plan, you could sell your shares in the market, you could get a 401K loan, or you can access some of your home equity. This video will go over all of the implications these options have and what you could do to prepare for future economic downturns.

 

“I’ve been in the financial services business since 1985 and this is actually the fifth market correction that I’ve been through and I’ve learned a few things that have helped my clients to weather the storm.”

 

Today we’re in the midst of the covid-19 pandemic. Because of the pandemic, there are a lot of financial and economic uncertainty in the world and today we’re going to talk about how you could possibly position yourself to take advantage of this financial opportunity and come out better on the other end.

First, we’re going to discuss what you may be experiencing out there in your economic world.If you’re an employee, you may have been laid off or working from home during the pandemic. Either way, these changes cause stress and whether or not you’re still earning income, your bills are still accumulating and if you’re a business owner, your overhead continues. Plus, you have the added stress of knowing that the livelihood of your employees and their families are in your hands. So, at this point, most people, whether you own a business or whether you’re an employee, you’re stressed out trying to think about where you can raise some money to get through this financial crisis,
which brings us to our next point. Where do you have money stored that you could have access to it during this tough financial time?

Let’s face it, most people had money invested in the market and for 11 years that was the place to be and it worked until it didn’t. Well, now the market’s down quite a bit and with your income being reduced, you’re scrambling to get access to capital. Now may not be the best time to be selling your investments in order to pay for your current lifestyle.

Another place you may have access to money is in your retirement plan and for some people this may be your only option. There are a few things to consider if you plan on taking money from your retirement plan. First, if you’re 59 and a half, you’ll have to consider the penalty that will be applied to your distribution. Everyone will have to consider the taxable income from the distribution and most people at this point will have to consider the losses that were hit on their account.

You may not want to be selling at this point, but if that’s the only place you can get access to money, that may be the only option. You also may have options in a 401k, where you can get a 401k loan. But again, there are things you need to consider. Number one, the amount of the loan is limited and number two, the loan has to be repaid usually within a five-year period. In essence what you’re doing is obligating your future income.

This could become a problem, especially if your job is eliminated. Any outstanding loan balance would be taxable fully as income at that point. Also, if you’re under 59 and a half, you’d have to consider the penalty that would be applied. Another place you may have access to your capital is in your home equity, whether you were paying your minimum mortgage payment or paying extra on your mortgage. People have money stored in the equity of their home and they feel that it’s their money. They can get whenever they want, but the reality is the bank will only give you permission if you qualify for being able to repay that loan. The fact of the matter is during these uncertain financial times, the bank may not be readily willing to allow you access to your home equity. I remember a quote from the syndicated radio show host, Paul Harvey, and he said, “it’s times like these that remind us that there have always been times like these.” The point that I got out of it is, the fact that if you were prepared for these times, you wouldn’t have to be scrambling and looking at accessing money from places that may be have restrictions as far as accessing it.

I’ve been in the financial services business since 1985 and this is actually the fifth market correction that I’ve been through and I’ve learned a few things that have helped my clients to weather the storm. First and foremost is the importance of having access to liquid cash when these scary financial times occur. The importance of having liquid cash, cash that isn’t tied to the stock market, or money that isn’t tied to the economy tap, cash that isn’t going to leave you with a tax bill. Cash that you could access at any time with no questions asked.

What we’re talking about is cash value, life insurance. Ladies and gentlemen, this isn’t new. This has been around for over 200 years. In fact, JC penny used cash value life insurance. He literally borrowed against his life insurance policies to weather the storm created by the great depression. He had 1400 stores, that’s 1400 stores full of employees that he was responsible for the well being of them and their family. He borrowed against his life insurance to weather the storm. Our point is that if you’re properly positioned, you can utilize and access the cash in your life insurance policy to help you weather Covid-19 and actually take advantage of the opportunities that are going to be created by this pandemic and created by this financial uncertainty.

Keep in mind, life insurance companies are specifically designed for times like these. They’re the most well capitalized businesses in the world. They’ve been through this before. They have a 200-year track record. They know what they’re doing during these scary financial times.

If you have a cash value life insurance and aren’t sure how to use it, please give us a call. We’d be happy to be of service. If you need help designing a policy to help you get through the next financial crisis, give us a call. We could help you design one that helps meet your needs.