Nobody wants to pay more taxes and people are always looking for ways to reduce them.
There are many retirement vehicles that help you reduce your taxes while you are working, such as 401k, 403b, SIMPLE IRA, Traditional IRA, etc. This is all fine and dandy, but what happens at retirement.
Many professionals tell us that we are saving taxes with these vehicles and that we will be in a lower tax bracket when we retire. That may be a valid point for some, but not for others. In essence, you are deferring taxes until the day you take out your money for retirement.
Frankly, if you are not doing a good job of saving for retirement, the least of your worries will be taxes But, if you are doing a good job of saving for retirement in those vehicles mentioned above, you just might put yourself in a larger tax bracket.
Let's face it. Do you think taxes are going to be lower or higher when you retire? I don't have a crystal ball, but I don't get a warm and fuzzy feeling when our national debt as of today is around
$19,211,398,331,662.95. And that's trillion folks. A lot of money.
Ok, so what can you do? There's a little known secret that a life insurance savings plan can give you tax free income. Whole life insurance and certain kinds of Universal Life Insurance can be used as a savings plan. I stress that these solutions are not a one shoe fits all solution. They work best for the people who can fund them for the long term. And they must be designed with the sole purpose of maximizing the cash value savings and not the death benefit. When they are designed properly, you can access the growth tax free via loans. The money you take from the policy reduces your death benefit. In essence, you are spending your death benefit while you live. The loan interest varies with different insurance companies.
Doesn't it make sense to put some of your money into tax free vehicles? It seems too many people, especially high net worth individuals, are putting all of their eggs in tax deferral. May be great for reducing taxes today, but what about retirement. Do you want to pay all that tax at retirement when you don't have many choices for reducing taxes at that time?