Despite the Trump administration’s current attempts at lowering taxes, it’s tough to look at our $20 trillion national debt without wondering when — and how high — rates eventually will have to rise.
Another possible path: Life insurance
A Roth conversion is a popular choice right now, but it isn’t the only option. Rather than continuing to place all or part of their nest egg into a tax-deferred account, we’ve seen some savers redirect part of their funds into an Indexed Universal Life (IUL) insurance plan. The benefits can be considerable: tax-deferred growth, no contribution limits, income tax-free distributions, no penalties for withdrawals before age 59½, non-reportable income, no RMDs and a potentially income tax-free legacy (with the death benefit).
In his book, “The New Rules of Retirement Saving: The Risks No One Is Telling You About … And How to Fix Them,” Martin Ruby, a former actuary, describes in detail the strategy of converting an IRA to an IUL policy, which can significantly reduce taxes paid over many years through RMDs and the resulting taxation of the RMD money reinvested into taxable accounts. Ruby provides specific examples of how the strategy can be applied. Your adviser should be able to walk you through the pros and cons.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There’s an old Morgan Stanley ad that says, “You must pay taxes. But there’s no law that says you gotta leave a tip.”
It’s important to remember that deferral postpones taxes, but it doesn’t eliminate them. Eventually, Uncle Sam will want his share of the money you’ve been saving — and he can change the rules for how he gets it at any time.
That’s why many investors are looking at ways to put their own tax efficiencies in place — with strategies that will last their lifetimes.
If you’re worried about the money that’s piling up in your tax-deferred retirement plan, talk to your financial adviser and a tax professional about creating a tax-efficient strategy for the future.
Kim Franke-Folstad contributed to this article.
This is provided for informational purposes only; it is not intended to provide tax or legal advice. All individuals are encouraged to seek advice from qualified professionals regarding their individual circumstances.
-
Now Is Better Than Ever for Reshopping Car Insurance, According to New StudyThe latest J.D. Power study shows that car insurance is a buyer’s market right now, as providers focus on retaining customers.
-
Stock Market Today: Wall Street Is Standing ByThe waiting is the hardest part with trade war truce talks underway and inflation data on the way.
-
Wealth Advisers: In Estate Planning, the End Is Just the BeginningWe need to keep the lines of communication with our clients open so that we can anticipate and help them navigate issues that arise over time.
-
Stood Up by a Radio Show: But Was It a Breach of Contract?A conscientious financial planner reschedules his clients after being invited onto a talk show and ends up losing one of them at a cost of $5,000. What does the radio show owe him, if anything?
-
Eight Estate Planning Steps to Protect Your Loved Ones (and Your Legacy)Two-thirds of Americans don't have an estate plan. If you're one of them, these are the essential steps to take now to prevent problems for your family later.
-
The Six Pros This Adviser Says You Need to Sell Your BusinessSelling your business isn't as simple as getting the best price and walking away. These are the six professionals you'll need to get a deal across the finish line.
-
The Three C's to Financial Success: A Financial Planner's Guide to Build WealthConsistency, commitment and confidence in your chosen strategy are more critical to your financial success than finding the 'perfect' financial plan.
-
A Financial Adviser's Guide to Solving Your Retirement Puzzle: Five Key PiecesIf retirement's a puzzle you're struggling with, try answering these five questions. The answers will guide you toward a solution.
-
You're Close to Retirement and Cashed Out: How Do You Get Back In?If you've been scared into an all-cash position, it's wise to consider reinvesting your money in the markets. Here's how a financial planner recommends you can get back in the saddle.
-
After the Disaster: An Expert's Guide to Deciding Whether to Rebuild or RelocateHomeowners hit by disaster must weigh the emotional desire to rebuild against the financial realities of insurance coverage, unexpected costs and future risk.
