Category: whole life insurance

The Financial Shock that Can KILL You

Middle-aged Americans who experience a major economic blow are more likely to die during the years that follow than those who don’t.

That’s according to a new study published in the Journal of the American Medical Association.

Shockingly, those who experienced a devastating financial loss – called a “wealth shock” – have a 50% greater risk of dying early. And it doesn’t matter how much money you had to start.

How likely are you to experience a wealth shock?

About 1 in 4 people in the study have had a wealth shock, averaging a loss of about $100,000. Often it was a result of a drop in the value of retirement investments or a home foreclosure.

Some shocks happened during the Great Recession of 2007-2009. Some happened before or after that.

But it didn’t matter if the economy was good or bad – a wealth shock still increased the chance of dying early.

The findings suggest a wealth shock is as dangerous as a new diagnosis of heart disease, says Dr. Alan Garber of Harvard University. Another expert noted that,

We should be doing everything we can to prevent people from experiencing wealth shocks.”

[Read more…] “The Financial Shock that Can KILL You”

Why is the “Father of the 401(k)” Now Putting His Money into a Bank On Yourself-Type Plan Instead?

It caused quite a stir when the man who is credited with being the “father of the 401(k),” Ted Benna, recently announced that he’s put a substantial part of his own money – “probably the biggest part of my wealth” – into what is most commonly known as a Bank On Yourself plan.

You see, for at least six years now, Benna has been calling the 401(k) a “monster” that “should be blown up.”

Benna is credited with finding a way to capitalize on the tax code to create a way for working men and women to supplement the pension plans that many workers used to have. Those pensions plans have been disappearing, and 401(k)s were created to hopefully help pick up the slack.

But over the years, Benna watched Wall Street and Big Business pervert the 401(k) in ways he couldn’t possibly predict.

In a recent interview, Ted Benna discussed three reasons why we should be very leery of 401(k)s and IRAs:

  • The government may repeal the 401(k) and IRA, so you won’t be able to put any more money pre-tax into these accounts, or the amount you can put in will be drastically reduced (Congress considered doing that again last year!)
  • Benna believes the next stock and bond market crash is imminent and could wipe out 40% of the typical portfolio
  • Wall Street has hijacked these plans, and the excessive fees charged by mutual fund companies and plan administrators are robbing you of up to half of your nest egg

I’ve Been Sounding the Alarm About 401(k)s and IRAs for Even Longer than Benna

[Read more…] “Why is the “Father of the 401(k)” Now Putting His Money into a Bank On Yourself-Type Plan Instead?”

Is Your Personal Balance Sheet – Your Financial Snapshot – Giving You a True Picture?

A balance sheet shows you at a glance what you own, what you owe, and what the difference is. The difference is your “net worth” – and the greater your net worth, the more you’re in a position to meet life’s financial uncertainties.

A balance sheet for John and Jane Doe, showing assets including $300,000 in retirement savings; and showing liabilities.
Figure 1. A Simple Balance Sheet
It’s called a balance sheet because your assets minus your liabilities always equals – balances – your net worth.

If you owe more than you own, your net worth is a negative number, and that’s an early indication of possible financial problems or bankruptcy in your future.

Here’s a simple balance sheet. See Figure 1. We see that John and Jane have added up the fair market value of their major possessions – their house, car, furnishings, cash in the bank, and retirement savings – and have total assets of $570,500. But when we subtract what they owe – their first and second mortgages, car loan, student loan, and credit card balances – their net worth (the cash they could come up with if they sold everything) is $369,000. [Read more…] “Is Your Personal Balance Sheet – Your Financial Snapshot – Giving You a True Picture?”

Why You’ll Need $500,000+ in Retirement for Medical Expenses Alone

Retirees spend more than a third of their Social Security benefits on out-of-pocket medical costs, on average, according to a new study by the Center for Retirement Research at Boston College.

Even after factoring in other sources of income, medical spending still took a huge bite – 18% – of seniors’ total retirement income.

A 65-year-old couple retiring now will need $315,000 to cover out-of-pocket health care costs during retirement, according to a study by Fidelity.

The news gets even worse, however, because these numbers do not include the cost of nursing home or home health care.

That can range from $60,000 a year for home health aides… to over $95,000 a year for a semi-private room in a nursing home, according to the Genworth 2022 Annual Cost of Care Survey: Costs Continue to Rise Across All Care Settings. And if you prefer a private nursing care room, you’ll have to cough up almost $108,000 a year.

Ignore the likelihood of needing long-term care services at your own peril: At least 70% of people over age 65 will require long-term care services, and more than 40% will need nursing home care, according to the U.S. Department of Health and Human Services.

Based on the average cost of a nursing home room and the average length of stay – which is 2.8 years – you would need over $250,000 to cover a single stay. [Read more…] “Why You’ll Need $500,000+ in Retirement for Medical Expenses Alone”

Federal Reserve Survey: Your 401(k) and IRA Won’t Give You a Decent Retirement

If you’re counting on your 401(k) or IRA for retirement income, I have some bad news for you…

A new analysis of the Federal Reserve’s latest Survey of Consumer Finances by the Center for Retirement Research demonstrates that 401(k) plans are destined to fail millions of Americans.

The Federal Reserve survey is updated every three years, and the latest one reveals that, in spite of the long-running bull market and an improving economy … the typical couple nearing retirement will only receive $600 per month from their 401(k)s and IRAs combined.

That $600 a month is not indexed for inflation, so its purchasing power will decline over time.

And that $600 a month is likely to be the only source of income people will have to supplement Social Security because the typical household has virtually no other savings outside of its 401(k) and IRAs.

The Retirement Savings Shortfall News is Even Worse for Younger Workers with 401(k)s

[Read more…] “Federal Reserve Survey: Your 401(k) and IRA Won’t Give You a Decent Retirement”

Five 401(k) Alternative Investments Options for Retirement

With something as vitally important as your retirement security, you need to be aware of 401(k) problems. And you have to ask yourself, “Do I really want to have to deal with all this? Are there good alternatives to 401(k)s?”

Let’s take a look at the drawbacks to 401(k)s and good alternatives to them. The 401(k) drawbacks include:

  • Unpredictable market performance, which means the very real possibility of losing a significant portion of your nest egg
  • 401(k) rules and limitations which can cripple your options and lock your money in a virtual prison
  • Fees, both visible and hidden, which can devour one-third or more of your hard-earned money in the plan
  • Tax deferral, which can siphon off another one-third or more of your income during your retirement years

Four Major Issues You Face When Planning for Retirement: Safety, Restrictions, Fees, and Taxes

Safety comes down to risk versus reward. Great potential gain brings with it great potential loss.

Investopedia sums up risk and reward this way: “Investing requires a degree of risk, and the bigger that risk, the higher the gain should be.”

The bigger that risk, the higher the potential gain should be—and the greater the potential loss will be.

What will you do if you don’t have enough to live on because of lackluster performance, restrictions, enormous fee, taxes on your income—or a major crash just before you planned to retire?

Will you work until you’re too ill to work, or you need to quit to take care of a relative, or you’re replaced by some kid one-third your age? (Nearly half of all retirees are forced to retire sooner than planned for just these reasons, according to the Employee Benefit Research Institute.)

Will you go on welfare or be shuttled back and forth between your children? Will you live under a bridge?

You can’t afford to lose your retirement nest egg, any more than you can afford to lose your next paycheck. And if you can’t afford to lose it, you can’t afford to risk it.

Yet government-controlled plans assume you want to invest your money in some endeavor with the hopes of making a profit. But investing, by its very definition, includes the concept of risk.

And the investment doesn’t need to be sketchy to involve risk! Investments in companies as “solid” as Blockbuster Video … Borders Books … Pan Am Airlines … Sharper Image … Enron … Polaroid … even Bethlehem Steel … have led to the downfall of millions of investors who thought they were being cautious, wise, and conservative.

Trillions of dollars have evaporated from 401(k) plans due to market fluctuations alone.

The U.S. Securities and Exchange Commission is blunt about the risks of investing:

All investments involve some degree of risk. If you intend to purchase securities—such as stocks, bonds, or mutual funds—it’s important that you understand before you invest that you could lose some or all of your money. Unlike deposits at FDIC-insured banks and NCUA-insured credit unions, the money you invest in securities typically is not federally insured. You could lose your principal, which is the amount you’ve invested. That’s true even if you purchase your investments through a bank.”

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Rules and Regulations That Strangle Your Access to Your 401(k) Money

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Government-approved retirement plans have more strings attached than Pinocchio before he became a real boy. It’s like your money is locked up in a maximum-security prison where someone else calls the shots—and you barely get visitation rights!

Contribute to a 401(k) plan and you’re contributing to a plan that tells you the maximum amount you can put in.

Your plan will also dictate what you can and cannot invest in.

You’ll learn that you can only borrow a relatively small amount, and you must pay it back on a strict schedule—or you can’t borrow at all.

These restrictions may seem normal, but not if you know the 401(k) alternatives.

The government tells you how long you must wait to access your 401(k) plan money—your own money! You’ll pay penalties for taking virtually any distributions before you’re 59½.

Uncle Sam will tell you when you must access your money, and how much you must withdraw (and pay taxes on) each year. You’re forced to start taking distributions when you reach 72—whether you want to or not.

Don’t get suckered into believing you control the money in your 401(k). Your plan is only tax-deferred because the government created it that way. And what the government created, the government controls.

The government can—and does!—change the rules any time it wants! The prison warden has your money under lock and key, and while your money’s in the slammer, he can impose any new restrictions or regulations he comes up with—and you have no recourse.

Do all retirement planning strategies come with those kinds of rules and restrictions? No! There are 401(k) alternatives that we’ll discuss soon.

The Fees You Pay with a 401(k) Plan Compound Against You

Virtually every investment plan and most savings plans have fees or potential fees of one kind or another.

In 401(k) plans the compounding of fees works against you. It doesn’t matter whether you win or lose in the stock market, your stockbroker or the financial representative managing your money will still get paid.

The impact of 401(k) fees is colossal. According to an exposé on 60 Minutes, fees “can eat up half the income in some 401(k) plans over a thirty-year span.” Yikes!

You really do need to know in advance exactly what effect fees will have on your balance. But just try to find out from your plan administrator or financial planner!

The Truth About 401(k) Plan Tax Deferral

Whoever talked you into starting your 401(k) probably told you what a great advantage tax-deferral is. “You can deduct the money you put into your 401(k), and it grows tax-deferred. You don’t have to pay taxes on your growth each year!”

If you bought into that, you’re in good company. An overwhelming number of Americans—and Canadians, with their registered retirement savings plans (RRSPs)—are in the same boat you’re in.

Many folks haven’t stopped to consider that when they retire—or when they’re forced by the government to start withdrawing from their 401(k) plan—they’ll pay income tax at the going rate on every single dollar they withdraw.

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They’ll pay tax on the money they originally contributed, because the government let them deduct that money from their taxable income. Now Uncle Sam is holding his hand out, palm up. And in his other hand, he’s holding a club.

And when folks withdraw from their 401(k) plan, they will also have to pay taxes on their earnings.

All those taxes were deferred—postponed—not cancelled!

Here’s what that could mean to you:

Let’s assume you’ve retired and you need $70,000 in retirement income annually to maintain your lifestyle and do some traveling.

If that income is from a 401(k) plan and you pay an average tax rate of 25%, your retirement plan will have to throw off $93,333—not $70,000—every year. You’ll need that extra $23,333 every year just to pay the taxes on your 401(k) income.

But tell me this: if your retirement plan could throw off $93,333 per year, wouldn’t you rather spend that extra $23,333 enjoying life more, rather than feeding Uncle Sam?

Why not pay your taxes up front while you know what they are, and then have income with no taxes due in retirement?

A Review of Some 401(K) Plan Alternatives

If you don’t like heavy-handed government-controlled plans, broaden your horizons. There are methods of saving for retirement that don’t depend on unpredictable market performance … that have very few, if any, government restrictions … that tell you in advance what your minimum account will be at retirement (and any point along the way)—after fees … and that don’t have any of the pitfalls of the tax-deferral trap.

Not every 401(k) alternative offers every one of these advantages. But there is one that does. It actually offers more advantages, as you’ll see. Let’s look at the five common 401(k) alternatives.

#1 IRAs and Roth IRAs

IRAs are like other government-controlled plans, with one exception: Roth IRAs. You fund a Roth with after-tax money (unlike traditional IRAs), and you can withdraw money from your plan in retirement without paying taxes, subject to various regulations and controls.

#2 Municipal Bonds

Municipal bonds are debt securities issued by government entities to fund day-to-day obligations and finance capital projects such as building schools and highways. Generally, the interest on municipal bonds is exempt from federal income tax.

#3 Gold, silver, and other commodities

Commodities are basic goods used in commerce. Examples are gold, beef, oil, lumber, natural gas, iron ore, crude oil, salt, etc.

#4 Real estate

Real estate may be raw land, or it may be improved with buildings, farms, homes, and so forth. You receive income from renting or leasing the property, and you may realize a gain when you sell it.

#5 Dividend-paying high cash value whole life insurance

Using life insurance as an alternative to a 401(k) plan may seem odd. But it’s not to the hundreds of thousands of individuals, families, and businesses, who are doing it every day. The cash value component of a dividend-paying whole life insurance policy can be used during the insured’s life to provide a guaranteed, predictable retirement income, and for other purposes.

Which 401(k) alternative is best?

What’s the best 401(k) alternative? The comparison chart below will help you decide.

Comparing 401(k) Plans with Alternatives

Does the plan …
401(k)s & 403(b)s
IRAs & Roth IRAs
Muni-cipal Bonds
Gold & Silver
Real Estate
Dividend-paying whole life insurance
Give you guaranteed, predictable growth? N N N N N Y
Lock in your principal and growth, even when the market crashes? N N N N N Y
Give you control of your money or asset without government restrictions and penalties? N N Y Y Y Y
Give you tax-free retirement income? N Only Roths Y N N Y
Let you use your money or asset without penalties or the possibility of incurring a loss, however and whenever you want? N N N N N Y
Let you use your money or asset, yet still have it grow as though you didn’t touch it? N N N N N Y
Allow you to fund your plan every year, without limits imposed by the government? N N Y Y Y Y
Finish funding itself if you die prematurely? N N N N N Y
Tell you the minimum guaranteed value of the plan or asset on the day you expect to tap into it, and at any point along the way? N N N N N Y

 

To learn more about a properly-designed dividend-paying whole life insurance strategy as a 401(k) plan alternative, and to find out what it can do for you, request a FREE Analysis. You’ll receive a referral to a Professional (a life insurance agent with advanced training on this concept) who will prepare your Analysis and answer all your questions about the concept.

What Is a 501k Plan & Is It an Alternative for Saving for Retirement?

Let me cut through the hype and give you the scoop: The 501(k) plan is just the latest name the Palm Beach Research Group has given to the concept most people know as Bank On Yourself, which is based on a high cash value dividend-paying whole life insurance policy.

The Palm Beach Group has been bombarding subscribers to various email lists about a “warning” issued by the “Father of the 401(k),” Ted Benna.

The Palm Beach Research Group wants you to watch a long video interview they did with Ted Benna, where he reveals three dangers he sees coming that could impact your 401(k) and IRA accounts. He says these dangers could slash your savings by 40%. And you’re promised that by watching this long interview you’ll learn about “a non-government sponsored 501(k) plan” that may “be the only way left for most Americans to retire today.”

This secret plan is touted as a 401(k) alternative “account,” where Benna and some prominent members of Congress have put some of their savings, to shield them from these three dangers.

Unfortunately, even after you watch the lengthy interview with Ted Benna, you still won’t know what this “account” actually is—until you fork over $75 to $149 to subscribe to the Palm Beach Letter and get your copy of their “new” book, The 501(k) Plan: How to Fully Fund Your Own Worry-Free Retirement—Starting at Any Age.

And the Palm Beach Group further confuses people by calling it a “501(k)” when there already is a provision of IRS code–Section 501(k)–that relates to tax treatment of child care organizations, and has nothing to do with the 501(k) the Palm Beach Group is talking about! (It should also not be confused with Section 501(b) which relates to financial institutions and privacy.)

You can’t judge this book by its cover

“New” book? As it turns out, this is not a new book at all! They simply slapped a new title on a book they published a couple years ago about alternative retirement investments, and added a foreword by Ted Benna. The old book was called The Big Black Book of Income Secrets. In fact, at least once in the “new” book, they forgot to change the name and they call their “501(k) Plan” book The Big Black Book of Income Secrets.

You can read my review of this “new” book under its original title, The Big Black Book of Income Secrets, here. My review points out all the red flags regarding the strategies covered in the book that should cause you concern. In addition, many of these strategies are not new at all, and some are exceedingly complex.

The Palm Beach Group Used to Call the “501(k) Plan” “President Reagan’s Secret 702(j) Retirement Account,” and Before That, the “770 Account”

These are all names they gave to what most people know as the Bank On Yourself concept I’ve been talking about since 2001. They’re using sleight of hand, hoping to keep you from getting the full scoop for free. You can learn all you need to know about the 501(k) when you download my 20-page Report on this strategy—5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future—right here for FREE.
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In this report, you’ll get the full story about the “501(k) Plan”—minus the misinformation and hype—that Palm Beach Group wants you to pay good money for. You can also see what they got right—and wrong—about this concept in my blog posts about the 770 account and President Reagan’s Secret 702(j) Retirement account.

Why Does the Palm Beach Research Group Keep Changing the Names of Its Products and Strategies?

Because if you knew the earlier names they gave to their books and strategies, you could just Google them and get the scoop—for free. Google would direct you to Bank On Yourself and then the Palm Beach Research Group couldn’t trick you into paying as much as $3,000 or more for each for their newsletter and advisory services.

Spoiler Alert: The 501(k) plan Palm Beach Group talks about is a time-tested, safe wealth-building strategy based on high cash value, low commission, dividend-paying whole life insurance that’s been used by wealthy, successful people, presidents and famous entrepreneurs for well over a century. But almost anyone can use it to take control of their money and finances – regardless of age or income – as you’ll discover when you download this FREE Special Report.

Something Happened That the “Father of the 401(k)” Never Foresaw

Ted Benna is widely credited with finding a way to capitalize on provisions of the Internal Revenue Code Section 401(k) to create a way for working men and women to augment their retirement savings, beyond the pensions many workers received.

But Big Business and Wall Street perverted the 401(k) concept in ways that Benna couldn’t possibly foresee, and in 2011 Ted Benna said he had created “a monster” that should be “blown up.”

Our hats are off to this man with integrity and the courage of his convictions.

3 Big Takeaways from Ted Benna’s Presentation on the 501(k) Plan

There are three key points that Ted Benna made in his recent interview for Palm Beach Group:

1. The first was the danger that government-sponsored retirement plans could be “repealed”

Benna says, “There could be a repeal of the tax advantages these plans offer. So either you won’t be able to put any more money pre-tax into accounts like 401(k)s and traditional IRAs, or the amount you can put in each year will be drastically reduced.”

2. Benna says he believes the next stock and bond market crash is imminent and could wipe out up to 40% of the typical portfolio

He says, “If you’re retired—or on the verge of retirement—and you’re trying to plan a few years down the road, this is something you’ve got to pay serious attention to. Because, if you’re planning your retirement expecting your portfolio will grow at, say, 5% or 6% a year, what happens if another ’08 comes our way next month? What happens to your retirement accounts? … I lost more than I like to admit in my own 401(k) 10 years ago. So I try to learn from my mistakes.”

3. 401(k)s and IRAs have been “hijacked” by Wall Street

“The third danger is fees. This is more of a ‘hidden’ danger. And it’s already here. It’s hidden because it’s not as drastic as, say, a 40% drop in stocks or bonds. But, over the long run, it’s just as deadly. … The average household is paying $155,000 in fees over the course of their lifetime. That’s a significant amount of cash. And all this money is going to Wall Street.”

Benna makes the point that excessive fees charged by mutual fund companies and plan administrators are robbing you of up to half of your nest egg.

I’ve been warning of these dangers and others for years. For starters, see …

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Want more information about America’s most popular (and scariest?) retirement plan? Just click here to see all of the search results for “401(k)” on our site.

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Benna Says the 501(k) Plan, Better Known as Bank On Yourself, Avoids the Dangers That Traditional Retirement Plan Accounts Face

He’s right. In fact, I’ve been saying that for years.

Benna says that for these reasons and more (including the tax advantages), he has, in his words, “put most of my money in the 501(k).”

Ted’s got it right. The 401(k) is a troubled concept. In fact, the idea of individual wage earners investing their life savings in the stock market is a troubled concept.

And, as Ted eloquently explained, a plan such as Bank On Yourself (which Ted Benna and the Palm Beach Research Group have chosen to dub the 501(k) Plan) neatly sidesteps all those problems, and provides some additional advantages, as well.

So What Exactly Is a “501(k) Plan”?

“501(k) Plan” is just the latest mysterious-sounding name the Palm Beach boys have given to their strategy that copies Bank On Yourself. And Bank On Yourself, as we are always happy to explain, is a safe savings and wealth-building strategy based on a specific type of high cash value dividend-paying whole life insurance.

No, it’s not the kind of permanent life insurance that most self-proclaimed financial gurus love to hate. There are major differences. But it is a form of supercharged permanent life insurance.

[this account] has become a tax shelter for the rich... it gives the affluent tax advantages far beyond those available to middle-income people through a 401(k) or IRA.Want proof that’s what the Palm Beach Group is talking about? In the transcript of their long interview with Ted Benna, Palm Beach includes a quote, attributed to the Wall Street Journal. Note that they’ve removed the Journal’s identification of the product and replaced it with their own vague words, “this account.”

A look at the Wall Street Journal report they’ve quoted shows what the Journal actually said back in 2010: “Permanent life insurance has ‘become a tax shelter for the rich.’”

We include that Wall Street Journal quote only to demonstrate what the Palm Beach Research Group is talking about. You will realize that permanent life insurance is not a tax shelter merely “for the rich” when you read our article, “The Truth About Whole Life Insurance and Why It’s More Than a ‘Rich Man’s Roth’.”

In the interview Ted Benna did for the Palm Beach Research Group, he discussed what you’ll find in The 501(k) Plan book they are promoting. He said you’ll learn the details of this “account” and how to open one, in the first chapter of the book.

And Chapter 1 of the book is all about “Income for Life,” which is yet another name the Palm Beach Group gave to the concept and strategy more commonly known as Bank On Yourself.

It’s crystal clear. The Palm Beach Group would like to sell you information we believe you’re entitled to have for free. And we’ve been giving that information away for free in this Special Report and on our website since 2001.

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How to Open Your Own “501(k) Plan” or Account

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… or what you now realize is better known as a Bank On Yourself plan.

You need to talk with a life insurance agent who has been trained in the special requirements of high cash value life insurance policy design. But on page 46 of their book, The 501(k) Plan, the Palm Beach Group makes this outrageously untrue claim:

The government regulates the fees life insurance agents can charge you. So from a cost perspective, it doesn’t matter whom you choose. You’ll pay the same.”

Let me set the record straight: It absolutely matters who you choose to help you open your 501(k) plan …

The government does not regulate the fees, and even if the amount you pay were the same from company to company, which it is not, the agent has great discretion in how he structures your plan. Done one way, he gets paid about what life insurances agent traditionally get paid.

But done with your best interests in mind, the agent’s compensation is slashed by 50% ‑ 70%, and that “extra” money goes into building your policy’s cash value. Bank On Yourself Professionals are committed to this concept and are willing to accept a compensation cut, knowing you’ll be so pleased with the performance of your plan that you’ll refer your agent to your family and friends, as well. In fact, that happens all the time.

Talk to Someone with Your Interests in Mind to Start Your 501(k) or Bank On Yourself Plan

To talk with an agent with extensive training in this area who cares about your welfare, you want to talk with a Bank On Yourself Professional. It may surprise you to know that only about one out of every 20 insurance agents who apply to become Bank On Yourself Professionals are actually accepted. The training and commitment required are that tough.

So go to the source that’s been open and straightforward with you from Day One, Bank On Yourself. Request a FREE Analysis and custom-tailored recommendations at no cost or obligation. You’ll get a referral to an Bank On Yourself Professional (a life insurance agent with advanced training on this concept) who will prepare your Analysis and personalized recommendations.

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Is “Tax-Free Retirement” Too Good to Be True?

Tax-free retirement—living a comfortable life in retirement without the obligation to pay income tax—comes as the result of planning and arranging your finances (following IRS guidelines every step of the way) so that when you retire, none of the money you receive is taxable—perhaps not even your Social Security income.

Tax-free retirement is good, and this article reveals how to make it happen.

Is Avoiding Taxes on Your Retirement Income Legal?

Reducing or avoiding taxes is perfectly legal. People take steps to reduce or avoid taxes all the time. They may donate to charity to avoid paying as much tax. They deduct their mortgage payments. They take legitimate business deductions. They may shift medical expenses, hoping to bunch expenses into one year and exceed the threshold for deductions that year. These are just a few of the legal tax-avoiding measures Americans take every day.

Many people even believe they have an IRA or a 401(k) to avoid paying taxes. But that’s a trap, because traditional IRAs, 401(k)s, and most other government-controlled retirement plans do not allow you to avoid paying taxes. They merely postpone tax day. We’ll talk more about that in a few minutes.

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands.” — Supreme Court Justice Learned Hand

So while avoiding taxes is legal, evading taxes is not. Maybe you don’t report your income. Maybe you take deductions you’re not allowed. Or maybe you just tell the IRS to take a hike. That’s tax evasion.

But make no mistake: A tax-free retirement can be achieved legally, using IRS-approved methods.

Ways to Avoid Income Tax in Retirement

[Read more…] “Is “Tax-Free Retirement” Too Good to Be True?”

The Truth About Whole Life Insurance and Why It’s More Than a “Rich Man’s Roth”

UPDATED October 2019

I came across an online article by a blogger who ignorantly claimed that the only good purpose for whole life insurance was as a rich man’s Roth and only for individuals whose high incomes made them ineligible for the tax-saving advantages of a Roth IRA. He’s dead wrong — you don’t have to be wealthy to benefit from the incredible advantages of whole life insurance.

Let’s look at how a Roth IRA works vs. a dividend-paying whole life insurance policy.

How Does a Roth IRA Work?

A Roth Individual Retirement Arrangement (Roth IRA) is an IRS-approved strategy that allows you to invest money you have earned by making contributions to a Roth IRA plan you have set up. You are not allowed to take a tax deduction for your contribution as you are with a traditional IRA. However, any earnings you withdraw from a Roth IRA aren’t taxed — as long as you’re at least age 59 1/2 and you’ve had the Roth IRA for at least 5 years.

How a Roth IRA differs from a traditional IRA

Roth IRAs are quite different from traditional IRAs.

With a traditional IRA, your contributions are tax-deductible. However, when you withdraw money from your traditional IRA—and you must withdraw specific percentages annually, beginning soon after your seventieth birthday—you must pay taxes on everything you withdraw—at whatever the tax rate happens to be at the time.

See the table for a summary of the key differences between a Traditional IRA and a Roth IRA. [Read more…] “The Truth About Whole Life Insurance and Why It’s More Than a “Rich Man’s Roth””

The Surprising Truth About What Happens to the Cash Value of Your Life Insurance Policy When You Die

In Part 1 of this two-part series, I proved the media’s financial gurus are wrong when they claim that it takes years to build cash value in a whole life insurance policy.

In this second part of the series, I’ll show you why all the self-proclaimed experts miss the boat when they claim that whole life insurance policies are a rip-off because you build up all that cash value, then the insurance company keeps it when you die and only gives your heirs the death benefit.

It doesn’t have to be that way, my friend!

Life insurance annual policy statement
Click on the policy statement above to see a larger version

Here’s an actual whole life insurance policy annual statement. (This is a different policy than the one I showed you in Part 1.)

Life insurance annual policy statement
Click on the image to open as a pdf

This is a whole life insurance policy purchased on my life in 1992. The statement I’m showing you, issued 17 years later, makes some astounding revelations. [Read more…] “The Surprising Truth About What Happens to the Cash Value of Your Life Insurance Policy When You Die”