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Why Opt For A Life Insurance Policy?

Let’s assume that you’re sixty-five and you have $300,000 in an IRA and it is not needed for retirement. Let’s also assume you’re in a 35% tax bracket. So, actually, you  only own 65% of your $300,000 IRA, or approximately $195,000, because 35% will go for taxes. What if you withdrew the IRA today and paid the taxes? The remaining $195,000 could be used to purchase a single-pay life insurance policy with a death benefit of $750,000. That means you won’t have to pay monthly payments to the life insurance policy and every penny of that $750,000 would pass tax-free to your beneficiaries.  What’s more, life insurance offers protection if you die prematurely. Plus, it provides a lump sum cash amount for emergencies and tax-free retirement income if desired.

If you were to leave the $300,000 in your IRA and you continued in the tax bracket of 35%, your IRA would have to grow to $1.1 million to provide your loved ones with the same $750,000 after taxes. At age 65, you can assume you have approximately twenty years to live. When doing the math, your IRA would have to grow at a compound rate of 7% just to equal the life insurance benefit.

Another approach utilizing a life insurance policy would include using your life insurance to pay the equivalent Roth IRA conversion taxes after your death. Rather than converting to a Roth IRA and paying the tax lump sum now, a more affordable strategy would be to purchase, with installment payments, a life insurance policy with a death benefit equal to what the taxes on your IRA will likely be in 20 years. That allows you to convert your IRA to a Roth but pays your taxes after your death.

A life insurance policy can be a tool you use to manage your money wisely. So, let’s talk more about what you need. Contact me directly at (866) 471-7233 for a free consultation so I can help you keep your money SAFE!