THE LIFE INSURANCE RETIREMENT PLAN – REPORT (LIRP)

 

At American Financial Literacy Institute we’re always looking for ways to better educate our people. In particular, we created a report called the Life Insurance Retirement Plan. In this report we compare some of the differences of using life insurance as a retirement planning alternative unlike a traditional 401k or something of this nature. In particular with Life Insurance, we get some benefits that we don’t get in a traditional 4o1k or IRA. In particular, we can have tax free distributions on the back end, meaning that when the money comes out we don’t pay taxes. Unlike a 401k or IRA, we have to pay taxes on the back end, we don’t get a tax deduction upfront, but we do get the ability to have the money grow tax deferred and then have it come out tax free so it could be a really powerful story. The other thing we talk about is how Life Insurance; the investment component of it can be done in an indexing type concept. What do I mean by indexing? In particular, it’s a strategy that allows you to target the SMP 500 or a multi-asset index (there is many different investment options). As you invest in this, you don’t get 100% of the upside, but what you get is none of the downside. Meaning that if the market dropped five or ten percent, you would get zero. We joke and say “zero is your hero”. But over the last ten or fifteen years, this would’ve been a very powerful way for you to invest, protecting yourself, and actually outperforming a traditional buy and hold type strategy. On the back of this report, we explore specific examples of using a $10,000 contribution to your 401k every year, comparing that to a $10,000 contribution to a Life Insurance plan. While you do get a tax savings upfront with the 401k, because you get a tax deduction, when the money is growing in the 401k, you pay taxes coming out. With the Life Insurance example, you don’t get the tax deduction upfront, but what you do get is the money coming out tax-free! This can be a huge difference in the way of returns. In a traditional 401k, using a 7.5% growth rate (Warren Buffet cited from 1950-2011). That money would’ve grown to $268,000, meaning $10,000 a year for 15 years, $150k worth of contributions, at 7.5% would’ve grown to $268,000. And we show you using that how the money in a traditional 401k would come out. You have to pay taxes on that money so we assume a 25% tax bracket coming out with the 401k, and we notice that over that time of getting income. If we do a 30 year time horizon, you basically are going to pay over $150k in taxes while that money has been coming out of your traditional 401k. With the Life Insurance, again, we don’t get that tax deduction upfront, but we get the tax-free distributions on the back end. What that means is the $150k of taxes that you would’ve paid, you don’t pay that with the Life Insurance. The nice thing too is that as it’s coming out of the Life Insurance, it doesn’t effect your social security taxes. Unfortunately, most people don’t realize that potentially much as 50 to 85% of your social security could be taxed in retirement, depending on how much income they make. With the Life Insurance Retirement Plan, you don’t have that. The other thing is that it doesn’t effect your Medicare B Premiums. The last concept that we talked about with the report is taxes. Where are we currently in taxes? You’re not going to believe this, but we are in the lowest tax environments we’ve been in for the last 70-80 years. Most people feel with a budget out of control and the big deficits that we’re facing that taxes have to go up over the long run, so the argument can be made that deferring today to potentially pay taxes down the road at maybe a higher tax bracket isn’t going to make as much sense as you think it is. So if you think that taxes are going to go up, a Life Insurance Retirement Strategy might make more sense to you. It’s our job to educate you as to what is out there, this might be a piece to a portfolio, there are great reasons to have a 401k like potentially a company match. There’s also great reasons to maybe have some money in a Life Insurance Retirement Strategy.

 

 

**ACCESS THE REPORT HERE**
http://aflinstitute.org/wp-content/uploads/2017/10/AFLI-LIRP.pdf

COLLEGE PLANNING – SPECIAL REPORT

I’m really excited about our college planning special report. In this report, we talk about some things that are really important when planning for college such as having an open dialogue with your son or daughter, different types of federal loans that you could potentially participate in, tips for to apply to colleges successfully, and how to reduce costs. What are the different things you need to plan for in the way of finances that go well beyond just paying for college but are also part of the college experience. In this report we do a great job of laying the foundation so that you and your kids can plan for college successfully and make sure that everyone is on the same page.

 

ACCESS THE REPORT:

http://aflinstitute.org/wp-content/uploads/2017/10/College-Report.pdf