Erica Ramos of StreamTax Free Shares Her Tips
"If it’s not broken don’t fix it"…Many times this saying is thrown around with good intention, but what if something is broken and we just don’t see it? Retirement savings is one of these aspects of life that doesn’t necessarily look broken but is one that is and will cost people hundreds of thousands of dollars in taxes every year that could be avoided. Taxes are currently at an all-time low, which is the perfect time to reconsider how we are saving for retirement.
Here are 3 tips to help you with your retirement planning:
1. Be aware of tax risks associated with traditional retirement vehicles like 401k.
Conventional wisdom has told us to save for retirement using an IRA or a 401k, but when taxes go up and this money comes out, all that money saved will go down as well. If you’re like most people, you want to keep as much of the money you earn and invest and not give it to the Internal Revenue Service.
The government is spending at an astronomical rate and according to www.usdebtclock.org the U.S. national debt is currently thirty trillion dollars! The only way to compensate for this growing debt is to print money or raise taxes. What does this mean for your retirement? Increasing the money supply leads to inflation, prices will rise on goods and services, leaving retirees with less to spend and invest. In addition, we will be at the mercy of whatever prevailing tax rate is when we retire.
2. Take advantage of Cash Value Life Insurance.
What if there was a better way to save for retirement? A properly structured cash value life insurance policy can provide an attractive alternative for cash value growth vs. traditional retirement plans. The cash value accumulation in a Section 7702 compliant life insurance policy grows tax-deferred and may be accessed free of taxes in retirement through withdrawals and policy loans. At the end of life, the death benefit in the policy passes to the policyholder's beneficiary tax-free. As a business owner, you can bonus yourself or key employees into a Section 162 Executive Bonus Plan which is used to purchase this type of policy. This supplemental benefit can be funded using tax-deductible company dollars. Unlike other types of company-sponsored retirement plans your contributions are not subject to the same limits or non-discrimination tests for high-wage earners. The cash value accumulation in the policy grows tax-deferred and may be accessed free of taxes in retirement through withdrawals and policy loans.
3. Partner with a Financial Expert.
There are several options out there for Cash Value Life Insurance and it can be a bit confusing. Working with an advanced insurance specialist will ensure you are looking at what is appropriate for your income level, tax bracket, etc. This is crucial in making the best decision on a policy. Not all policies are created equal and should be looked at carefully. You can plan for your retirement with a strategy that gives you control, options, flexibility, and certainty about your retirement and the standard of living you’ll be able to enjoy.
About the Author:
Erica Ramos is a financial strategist and trust-based planner helping those who are currently saving or planning to save for their retirement needs. Find out more on her Website: www.streamtaxfree.com or message on Instagram @streamtaxfree.