The coming tax season is a perfect time to help your high-income clients assess the options available for their additional savings.
There are 5 key reasons why cash value life insurance can be a powerful savings vehicle when compared to other retirement income sources, especially a non-deductible IRA:
A concern for many retirees is how to ‘reduce and time’ income tax liability. When planning for retirement, clients with higher incomes must decide in which additional retirement vehicles to put their additional savings once they reach their qualified plan limits ($19,000 in 2019 plus a $6,000 catch-up for clients age 50 or older). Or, in the case of a traditional IRA, the maximum contribution to an IRA is $6,000 in 2019, plus a $1,000 catch-up for clients age 50 or older. Diversifying the income tax treatment of investments can reduce income taxes in retirement. Take a look:
Let’s assume that Terry retires and plans to withdraw $120,000 from her 401(k) annually. At her 35% tax bracket she would be left with $78,000. Alternatively, she could take a combination of withdrawals from various retirement income sources with different tax consequences and increase her net annual income by $22,000 to $100,000. Take a look:
