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After faithfully building a sizeable IRA through the years, you may find that you don’t need the distribution from your plan to maintain your lifestyle. However, while you don’t want to lose money to income taxes and estate taxes, you must begin to make use of the money by the age of 70 ½. This is the perfect opportunity to utilize the annual growth and income from your investments to multiply your wealth for the benefit of both your loved ones and a favorite charity. Through the innovative use of life insurance you are guaranteed a way of optimizing your wealth, rather than bequeathing a small percentage after taxes.
Here is a story about a 69-year old man who was able to maximize his $4 million IRA into a $14 million dynasty. The IRA was earning $240,000 interest annually, which if distributed, comes to $140,000 after taxes. By using that $140,000 to purchase a $10 million policy on his 64-year old wife, his family is guaranteed a $10 million benefit upon her death. That’s $10 million tax-free for his children without touching the $4 million principal in the IRA! Even if the policy lapses or is surrendered before a death benefit is paid out, the policy owner receives the benefit of financial protection from a mortality event occurring during the time the policy was in force.
So that the remaining $4 million principal would not be subject to income and estate taxes, the man set up a private foundation, so that upon his demise, the entire principal would go tax-free to his favorite charity. In order to create the equivalent of this wealth without life insurance, his IRA would had to have grown to approximately $45 million to leave $14 million after income and estate taxes. Also, if no increase or decrease were made to the original $4 million, it would be worth $1.3 million after income and estate taxes.
You’ve worked hard to save for retirement, so don’t allow your efforts to be diminished with taxes. Call Howard Kaye Insurance so we can help you make a difference in the futures of both your loved ones, and your favorite charities.
For illustrative purposes only. Actual results will vary based upon individual circumstances.
Howard Kaye Insurance Agency, LLC does not provide tax or legal advice. Clients should consult their own tax and legal professionals.
Guaranteed payment of life insurance proceeds are based upon the claims paying ability of the insurance carrier and making the required premium payments until the death benefit is paid.
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