The 3 Biggest Risks To Your Money in Retirement:
By: Delano Devon
Tags: Money, Retirement, Taxes, Income, Investing

Tax Risk Investment Risk Longevity Risk

Everyone should understand, there’s a HUGE difference between Tax Deferred & Tax FREE..it all comes down to one☝️ word, “yet”.

You don’t pay taxes “YET” but you will at some FUTURE rate. Ask yourself, where will taxes be in the future?

To set the stage here’s a Side Note: 🏦

If you have no money in your checking account and write a check, What happens? Your check bounces.

The U.S. government just wrote a $2 Trillion check (Stimulus Checks) with no money in the checking account. What will happen? Where will it come from? Where will taxes go?

It’s likely Taxes will go up!

ED Slott’s “ALWAYS RULES”

1. Tax FREE is ALWAYS better! — Meaning Uncle Sam 🇺🇸 isn’t a Partner to your assets.

2. ALWAYS Pay Taxes at the lowest rate possible — get that money out!

3. If you are currently in Retirement or close to it — Income is ALWAYS more important than savings.. You can run out of savings but you will never run out of income!

Throughout our hour long discussion with Ed Slott, CPA he discussed various strategies to help reduce your tax burden today so you can avoid the heavy tax hits later on, here they are:

STRATEGY # 1

Roth Conversions: Traditional IRA ⏩ Roth IRA

Do I pay taxes? YES..Pay Taxes NOW so you don’t pay LATER.

Once you convert to a Roth Ira there are no more RMD’s (required minimum distributions at 72).

The Roth Ira becomes your plan not the governments plan.

Once you convert your money will be growing tax FREE

You have the ability to leave a Roth Ira to Beneficiaries w/ tax FREE withdrawals!

Lesson of the Day: Start with a Roth Ira — capitalize on age, taxes, & the current market.

Example: You have two accounts…

Traditional IRA Roth IRA

100k Value 100k Value

Q: If Taxes go up ⏫ to 50%, what happens to the account values?

A: Your Traditional IRAs value is now worth 1/2 , while your Roth IRAs value is now worth double! — 0% tax automatically makes the account more valuable.

STRATEGY # 2

Cash Value Life Insurance — “Single Biggest Tax Exemption in the Tax Code” Ed Slott, CPA

Become the Beneficiary of your own Life Insurance by accessing the cash tax FREE.

Your Cash Value offers liquidity anytime, control, growth, tax free all GUARANTEED.

There is no Market Risk or Volatility involved.

Your Insurance is not an investment but a Contract w/guarantees.

💡Idea: Fund Cash Value Life Insurance with a Traditional IRA

Tax Planning Vehicle — Pay the tax NOW avoid the heavy tax hit LATER on distributions and offer yourself guaranteed growth.

Due to the SECURE Act, Stretch IRAs are no longer a thing. You cannot pass an IRA onto a child without heavy Tax Erosion. ⏩ High dividend paying Cash Value Policies held with strong Mutual Insurance companies are replacing IRAs.

Allows post death control — if you are concerned about spendthrifts, lawsuits, creditors etc. Often used as a tool to spend down on IRAs and still leave a windfall to children.

💡 Idea: Long Term Care Riders can be accessed through the Death Benefit.

🐘 Elephant in the Room: Long Term Care; no one likes to discuss it but it has huge costs personally as well as financially and can ruin assets more than taxes already do!

The added Rider allows children the ability to not reach into their own pockets.

STRATEGY # 3

Longevity Risk: Single biggest fear Retirees in America have? Running out of Money.

Are you generating guaranteed income in Retirement?

Income is ALWAYS more important than Savings. — Your savings can run out.

Guaranteed Income Vehicles — Annuities: Good for long term planning

RULE of THUMB 👍🏽: Basic Living Expenses should be covered from some sort of guarantees — automatically taken care of, no worries needed.

Gift of Financial Security is MAJOR — It allows for no Burden on the Family.

Guaranteed Tax Free Income for life — Roth IRA ⏩ Income Annuity

Q: I heard Annuities have Fees?! — YES! That’s what makes it work, cost of guarantees.

Stock Market has no Fees or guarantees though! Correct: if you lose up to 30% in the market that’s your fee!

No Fees on CDs?! That is correct, the nearly 0% interest + Inflation is your fee.

Disclaimer: Not all recommendations or suggestions apply to everyone. Consult your professional to develop a plan that fits you specifically. All information provided above are notes taken from an educational presentation with Ed Slott, CPA. All opinions are of Ed and you should always consult your Financial, Insurance or Tax Advisor before doing anything.