There is no doubt that summer has arrived. Much of the country is swealtering in 90+ degree temeratures with no end in sight. Kids are running around trying to keep cool, parents are losing their cool attempting to keep their children occupied during the summer vacation. At the same time another group of adult children are attempting to divert what could be a failure of historical propotions if the debt ceiling is not raised in the next couple of weeks in the US..
Here is something to ponder: would you trust those same elected officials that are failing to balance the budget and reduce the federal deficit with your hard-earned retirement dollars? Are you willing to give a large percentage of your nest-egg to the government once you start taking out distributions from your qualified plans? Well, if you own a 401k, an IRA or other qualified savings plan, that is exactly what you are going to do. You might think that you are in good shape with your retirement funds, but remember, whatever amount you have in your plan, subtract 25-50% of those funds as that is the amount that Uncle Sam will take for himself. You think 50% is too high? Maybe today, but given the debt situation, given that social security is under-funded, given that Medicare and Medicaid will probably not coninue to exist in their current form in another 10-20 years, and given that taxes are at a historical low, there really is only one way for tax rates to go in the future. Remember, your 401k plan is a deferred tax plan………and the rate that you will be taxed on your savings will be determined by whatever the prevailing tax rate is at the time you start your distributions. Given that those who are beginning to save today are doing so at historically low rates, there can be little question that tax rates will be higher by the time distributions are either required or mandated.
Ok, so now you have subtracted 25-50% from your saved funds number, will the remaining funds allow you to maintain your exisiting life-syle for the next 30-35 years? Will these funds allow you to pay for nursing care at a quality facility in the event you or your spouse becomes seriously incapacitated due to health concerns? Will you still be able to continue to live in your house once your spouse passes after accumulating health insurance bills?
So I am not here to bash 401k or other similar qualified plans. When they were first introduced, taxes were high, so the idea that you would be in a lower tax bracket at retirement was a sound one. Also, they were the perfect vehicle to save some additional funds that would help to supplement the defined benefit plans that most corporations had at that time. Also, any financial vehicle that helps us save is a good thing given the US propensity to spend and live either pay check to paycheck or in many cases beyond our means.
The purpose of this blog is to help educate. The reality is that 5 out of 100 people will be truly prepared for retirement, whatever your definition of retirement is. The other 95% will have to reduce their lifesyle, some significantly from their pre-retirment days. This trend will continue unless we allow ourselves to become better educated about the options available to us all. The follow the herd mentalilty is easy…….it must be right because everyone is doing it. However, what if there was an alternative way to secure a safe and financially healthy retirement? What if that way allowed for you to take tax-free distributions from your savings for the rest of your life? What if your retirement savings could help secure any long-term care needs that you may have in your twilight years? Beter yet, what if when you died you could also pass along a substantial legacy to your children or charity of choice?
There is another way that offers all of the above. It’s not sexy, it’s not what the ‘herd’ are doing. It’s not what most advisors will tell you about. But it works. Life insurance, in particular indexed universal life insurance policies, when properly structured, allow you to achieve all your financial goals, shielding you from the dramatic crashes of the stock-market along the way (think 2008). Interested? Curious? Contact me today to learn how to move away from the herd and make your financial future secure.
stayalivebenefits.com has partnered with Next Stage Financial to help our clients navigate their financial future. For a short video on this topic and to make an appointment to discuss how this strategy might fit into your financial path, go to www.retainmygains.com or fill out the contact form on this website.
RSS Feed
Friend sent me the link to your site, looks nice, I added you to my favorites
I relaly wish there were more articles like this on the web.