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GoldenTrust Insurance

Tax-free Retirement Plans

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What if you could:

  • Provide an income tax-free death benefit for the people who depend on you
  • Defer taxes as your accumulated cash value grows, and
  • Potentially access that cash value using income tax-free policy loans and withdrawals, to use for retirement income or other needs

Strategies to Save For Retirement

  • After Tax Strategy – when you set aside a portion of your after-tax income into an account earmarked for retirement. Taxes are paid annually on any earnings. An example of this type of savings is a Certificate of Deposit.
  • Tax-Deferred Strategy – when you set aside a portion of your after-tax income for retirement, earnings on the account grow tax-deferred. When retirement income is taken, taxes are due on the tax-deferred gain. A Non-Deductible IRA or an annuity is an example of this type of savings.
  • Pre-Tax Strategy – might include an Employer-sponsored qualified plan, like a 401(k) plan. You don’t pay current taxes on contributions made to the plan and earnings grow tax-deferred. Later when you take retirement income the benefits are income taxable.
  • Tax-Free Strategy – is similar to the Tax-Deferred Strategy: you set aside a portion of your after-tax income, and earnings grow tax-deferred. Retirement income is received income tax-free. A Roth IRA is an example of this type of savings. Another type of financial vehicle is permanent life insurance.

Let’s take a closer look at tax-free retirement strategies.

  • Roth IRAs: Good choice……if you qualify. In order to contribute to a Roth IRA your adjusted gross income must be below a certain threshold. In 2011, contributions are limited to $5,000 per person unless you’re 50 or older and then you can contribute an extra $1,000 as a catch-up provision.
  • What are your options if you don’t qualify for a Roth IRA, or if you want to contribute more?
  • Permanent Life Insurance: The primary purposes for purchasing permanent life insurance is for the death benefit protection that it provides. However, permanent life insurance offers the ability to build up tax-deferred cash value that can be accessed during your lifetime to generate a stream of retirement income – potentially income tax-free.

It may be that a combination of the two works best for you.

  • If you meet the income eligibility requirements for a Roth IRA but want to set aside more than the contribution limits allow and you have a need for protection, you may want to do both a Roth IRA and Permanent Insurance. Contribute the maximum you can under the Roth and then apply the excess amount to your life insurance coverage.