• D epending on the type of life insurance used, there may be surrender charges if the client decides to surrender the policy early. These charges would reduce the amount of funds the client could access.
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Here is what we tell clients: It is important to have some money in each bucket, because that gives you more flexibility in retirement. If tax rates are high when you retire, then you can take the money out of the tax-free bucket. If they are low, you will want to take them out of the tax-deferred bucket. This way you have options. Unfortunately those folks who just blindly invested all their money in the tax-deferred bucket could wake up to some very unpleasant tax bills in retirement.
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Our strategy: 1. First, we fund the non-qualified bucket to a level that the client feels comfortable with for emergency funds or liquid savings. 2. Next we look at their tax-deferred options. For most clients we recommend they invest at least to the point of matching. For some high-income earners we recommend they max out their contributions, always explaining the consequences in retirement. 3. Finally we look at the tax-free bucket and use Roths if available or investment grade life insurance. Sometimes we use a combination of both.
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4. Ongoing savings are used to fund the non-qualified bucket and the tax-free bucket in a ratio that the client feels happy about.
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It is our belief that the tax consequences of your client’s investments will have a much greater impact on their future than even investment returns. Feel free to use this tool to help protect your clients’ tax future.
See why BUILDER Suite Leads Client Management Software for Financial Professionals! For a FREE Web Demo call: 800.325.5540 or visit www.FinancialSoftware.com This offer is not available in conjunction with any other affiliate discounts, software renewals, and/or purchases prior to the promotion.
Katherine Vessenes, JD, CFP®, RFC®, has the best job in the world. She gets to help advisors, broker-dealers and insurance companies get their businesses to the next level. Known for fun and content rich training programs, she is an in-demand public speaker. Author of Building Your Multi-Million Dollar Practice, she also has her own private practice in Rhode Island. Contact: 952 401 1045 katherine@vestmentadvisors.com www.vestmentadvisors.com