In my last article I wrote about RMD's and their potential uses under the new Tax Reform act, as well as opportunities of moving products out of tax qualified plans, paying taxes at these new low rates and then placing the money in Single Premium Life plans with chronic illness and return of premium provisions. This article was, of course, aimed at people that were older and probably in or near retirement. Today, let's move down the age ladder and look at the younger typical American worker and family.
Typical client/candidate:
The Opportunity:
Client has a 401K with a decent matching of 50% up to 2%. So, the client is weighing the decision as to whether or not to fund an IRA as opposed to, or in addition to, the 401k. But, at the new tax rate, the client is having difficulty grasping the benefit of taking a deduction now at these low rates (pre-tax contributions into the 401K).
Or, as stated above, client could be in business for himself/herself and weighing a decision to fund an IRA.
What can we do to help the client /candidate?
How about taking the dollars he had earmarked for the qualified plan and place all, or part, into an overfunded life plan. The client can then, at a later date, through borrowings and withdrawals, possibly provide a tax-free income at retirement. On top of that, the client will also be providing a death benefit for "dream completion" and, quite possibly, have an accelerated benefit in the event of a chronic illness.
Why would we do this as opposed to a deduction via the IRA? Let's look:
If the client was going to have an income of $100,000 and a standard deduction or $24,000, this places him in the 12% federal income tax bracket. If the client feels that tax rates will go up in the future, and that he/she will make more in the future, then why take a 12% tax deduction now and pay taxes later when they are higher?
So, the answer just might be an over funded life product.
So, what do you do now?
Get with The Ohlson Group and let us run some proposals for your clients and prospects.
Typical client/candidate:
- Married
- Children
- Total household income of $100,000
- Possibly in business for himself/herself
The Opportunity:
Client has a 401K with a decent matching of 50% up to 2%. So, the client is weighing the decision as to whether or not to fund an IRA as opposed to, or in addition to, the 401k. But, at the new tax rate, the client is having difficulty grasping the benefit of taking a deduction now at these low rates (pre-tax contributions into the 401K).
Or, as stated above, client could be in business for himself/herself and weighing a decision to fund an IRA.
What can we do to help the client /candidate?
How about taking the dollars he had earmarked for the qualified plan and place all, or part, into an overfunded life plan. The client can then, at a later date, through borrowings and withdrawals, possibly provide a tax-free income at retirement. On top of that, the client will also be providing a death benefit for "dream completion" and, quite possibly, have an accelerated benefit in the event of a chronic illness.
Why would we do this as opposed to a deduction via the IRA? Let's look:
If the client was going to have an income of $100,000 and a standard deduction or $24,000, this places him in the 12% federal income tax bracket. If the client feels that tax rates will go up in the future, and that he/she will make more in the future, then why take a 12% tax deduction now and pay taxes later when they are higher?
So, the answer just might be an over funded life product.
So, what do you do now?
Get with The Ohlson Group and let us run some proposals for your clients and prospects.
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