Tax Diversification in Retirement

Many people make decisions about taxes in a vacuum…

But taxes have a significant impact on your finances in retirement.

The good news is that there are proven strategies to optimize your income so you can minimize your taxes.

In this podcast, we’ll show you how tax diversification can help you build a secure retirement.

Listen to learn:

  • How tax rates will change in the future

  • Why it’s a myth that you’ll have less income in retirement

  • How different types of investments are taxed

  • The difference between tax-deferred accounts, tax-favored accounts, and taxable accounts

  • How to achieve tax diversification

  • The impact taxes will have on your income

  • The essential facts about Roth IRAs

  • How you can use cash value life insurance as tax-free income in retirement

  • And more

Mentioned in this episode:

Transcript

April Schoen: Hello, everyone, and welcome. I'm so glad that you are joining us today. My name is April Schoen. And today we're going to talk all about taxes. Oh, I know such a fun topic, right? I promise not to make it too boring for you. But listen, taxes is something that we need to talk about, especially when it comes to retirement. Because unfortunately, we see a lot of people who make decisions about their taxes in a vacuum. Okay, without taking into consideration the whole picture, we are so guilty of letting the tax tail wag the economic dog. Let me say that one more time. We are so guilty of letting the tax tail wag the economic dog. That means we're so focused on taxes today, that we don't really take into consideration the big picture. And we actually can end up doing some reverse tax planning. That means we're deferring taxes today at a lower rate, only to pay higher taxes later, right. 


So definitely not an ideal situation, not something that we want to do. But it is something that we see that happens when we don't think about it. And here's why this is so important that the decisions you make today will determine your destiny. Write that down. The decisions you make today will determine your destiny. Now, I cannot believe here we are at the end of April of 2022. And it's hard to imagine that two years ago is when COVID first started. I feel like so much has changed in the last two years. But I was just thinking the other day I was talking about with a friend of mine. How when when COVID first started in March of 2020, and how the whole world was shut down. 


And I just, I remember what that felt like. I remember all the uncertainty and the fear, right? All these concerns that we had about our health, and our loved ones. Concerned over the state of the economy. What did this all really mean? What was going to happen? And what would the future hold? Well, as fate would have it right before COVID, I hired a coach. She's a business coach for women. And I hired her actually funny enough, to help me with my public speaking. Because before COVID, John and I did a lot of live seminars in our training room here in Tallahassee. We'd have 80, 90, sometimes over 100 people. And so I hired her to help me with my public speaking. But I got so much more. And I'm so grateful that I hired her. I knew, let me be honest, too. 


So I hired her in February, then COVID hit. And if I'm being honest, I really debated keeping her as a coach because I was paying her monthly, right. So there's an investment that I was making in myself, but I was paying her monthly. And there was just a lot going on. We didn't know what was going to happen with the economy. We didn't know what was going to happen with my career, with my husband's career. So I almost stopped working with her. But I'm so glad that I didn't. So she's a business coach for women, like I said, and she was great to have someone that I could lean on. Someone I could bounce ideas off of. She's been a coach for 30 years. And her experience, her perspective in working with countless other business owners was invaluable to me at that time. And she was, she was well worth the investment. In fact, I'm still benefiting from some of the work we did together now over two years ago. 


And I'm telling you all of this, because I think we've all been there in that place of uncertainty. In fact, you might be feeling that now. Right? As you're thinking about what is retirement going to look like for you. Are you ready to retire? When will you know that you're really ready to retire? Not to mention all this uncertainty we have in the world today around inflation. Inflation is the highest it's been in 40 years. We've got interest rates rising. Look at the market as of Monday, the stock market, the S&P was down 10% year to date. But the most shocking thing is bonds are down 9% year to date. And we're only at the end of April, right. And then you throw on top of it some of that geopolitical risk that we're seeing right, that we're seeing over in Russia and we're seeing over in Ukraine. 


So that's why I'm telling you all of this because I know we've all been there in that place of uncertainty. And it really helps to have a team, have people around you that can help you get through that and help you, you know don't have bounce ideas off of. I was just talking with a new client yesterday. And she was telling me it's actually something we're going to talk about today, it has to do with Roth IRAs and Roth conversions. And I was we're kind of talking through it. And I helped her with a few things because she was like, oh, I'm gonna do this, this and this. And I said, great. Have you thought about how that's going to impact your Medicare premiums. Have you thought about, you can't contribute to a Roth once you stop working. So these were some things that she wasn't aware of, that we were able to walk through, okay. And that comes from having that, that experience. 


So before we get into all of the things today, because really, today, we're gonna be talking about taxes. We're gonna talk about taxes in retirement, we're gonna talk about how you can create your own secure retirement. And what I mean by that is your retirement, not my retirement, not your neighbor's retirement, not your co workers retirement, but your own retirement, okay? And what makes it secure isn't just that you have money, but it's that you have money coming in for the things that you want in your life. So before we get started, I want to tell you just a little bit about me and John. 


So John, and I, we're business partners, we work together. And John is amazing. He's been doing this, helping clients for over 47 years, okay, this year, we'll be going into 48. And he's really great at the strategy. He's great at being able to see someone's plan and spotting those red flags, if there are any, he's great. He can see what works, what doesn't work for people. And he can, kind of like I said, see those red flags, and if there's any point of weakness. And that really comes from him being in the business for so long, from doing this for 47 years, and helping 1000s of clients at this point in his career. Now, for me, you know, John's got me beat by a few years. I've been doing this for about 12, since about 2010. And one of the things that I really try to help my clients with is understanding what it is that they really want, what is it that you want? And what's holding you back from getting there? Okay? 


Because if we can take the time at the beginning to get to know you, get to know why are you doing this? What is it that you want your money to do for you? Then it helps us actually kind of create that plan for you. And what we find is that most advisors won't do that. They won't take the time to really get to know you. You know, they're gonna show you some charts and sell you a product. But what we want to do first is get to know you, and why you're doing this, and what is it that you really want? And how can we help you get there. And that's why I feel we have a very efficient team. Not only do we have the male and female perspective, but we also cover some age gaps. I'm 38, John will be 70 this year. So we have a lot of different perspectives that we can bring to the table. And also just how we approach planning. I kind of usually say you got the head and the heart working for you. 


So what before we get to get into the material, I do want to ask you a few questions to kind of get you start thinking about this tax situation. So my first question is, how do you feel about current tax rates? Do you think that tax rates in the future are going to be the same? Are they going to go up? Or are they going to go down? And then what about your income in retirement? Is your income going to be the same? Is it going to go up? Or is it going to go down? These are really two questions that we have to answer before we can kind of talk about more of the tax pieces. Now, let's be honest, we don't have a crystal ball. We don't know what tax rates are going to be in the future. But I can tell you this sentiment, I can tell you when I ask people in client meetings, clients this question, how do you feel about current tax rates? 


Almost everyone says they think that taxes are going to go up in the future. Okay, we've spent a lot of money over the last two years because of COVID. And at some point, this tax bill is gonna come due. Right. So I think most of us feel that tax rates are gonna go up. But then the other question is, is about your income in retirement? Is it going to be higher, the same or lower? Let me tell you what we find to be true. Most of the time, we find that people's income in retirement is the same or higher. Okay? Because it's actually a myth that our taxes will be lower in retirement. I want you to think about this for a few minutes. I hear it a lot. Oh, I'm gonna have my income, I'm going to have less tax in retirement. Okay. Why are you going to have less tax? People think they're going to have less tax because they're going to have less income. But is that what you want? Here you are stepping off into retirement where you now have all of this time, right? Every day feels like Saturday, right? Every Monday through Friday now feels like the weekend, where you can go and spend money and do the things that you want. So do you want lower income in retirement? 


I've never had anyone tell me they want less income in retirement. We usually want more to be able to go fund those things that we want to do. So it's a myth that you're going to have less income in retirement for most people, okay? So kind of keep that in mind. And we can help you with some of that too, figuring out what your income is going to actually look like. Now today, we're going to talk about how to optimize your income in retirement so that you pay less in taxes, which means you get to keep more money in your pocket. And this is important. No matter what stage of life you're in, no matter if you're where you want to be. If you're not, if you don't know how to get started, or even if you think you have it all figured out. 


So in about the next 50 minutes or so, I'm going to go through the most important aspects of how to have tax diversification for retirement, and you're going to know which pieces are most relevant to you. Okay, now, I'm going to be honest with you, we don't have enough time today for me to get all the information in my head and all the information in John's head to you. So what we're going to do if it's okay with you at the end, we're going to set aside some time so I can talk about a strategy session. So we can try to condense down this experience that John and I have working with clients, we can customize it to you so that you can create the retirement that you want. So if it's okay, at the end of our talk, today, I'm going to show you how to do that. But don't stop listening. Okay, we got some really good stuff today to go through with you. And then we're going to save some time at the end for that. Great. So let's get into it. 


So here are the three things we're going to go over today. Different types of accounts and how they are taxed, how taxes can impact your income in retirement, okay. And then how can you achieve tax diversification. And I'm actually going to show you a case study. So it's kind of cool, I'm going to show you if you had money in different accounts, what it would look like so that you can keep more money in your pocket. Now, it's not just about keeping more money in your pocket, it's also about having more control. Because when your assets when your money is spread out across different types of accounts. Specifically, we're going to talk about some tax-free and tax-favored accounts. What happens is there's less government control. You have less rules from the IRS about when you can take it, and when you have to, and how much and how it's tax and penalties and all that. So that's when we want to make sure that you have too, not just more income in retirement, but that you have more control over your income in retirement. 


And of course, we've got some disclosures to go through with you. So here, I'll give you the Cliff Notes version. I am not a CPA, I'm not a tax attorney. Okay. So we do recommend as we're going through it, and I'm being very serious here, we are going to talk about some specific tax strategies. And you should consult your tax or legal advisor regarding your own financial situation, okay. Because this is not something, I always say you don't want to do this at home. Meaning you need to seek professional advice so that you don't have a big, you don't make a mistake and have a big tax bill. 


So let's talk about the different types of accounts. Okay. Now, we talked about three different types of accounts. And while we know that there's always going to be taxes, we, it's impossible for us to foresee changes in tax rates, and know with certainty how that's going to impact your retirement. But for this reason, that's why we're a big believer of having tax diversification. Because when you use a wide variety of investment accounts, you're able to pay less in income tax when you begin withdrawing money from those accounts, meaning more income for you and your family. So here are the three types of accounts we're going to go through. Tax-deferred, tax-favored, and taxable. Okay, and we're going to start with tax deferred. 


Now tax deferred is by far the most common approach to retirement planning, we see. It's not the most efficient, especially from a tax standpoint, but it is the most common. Let me give you some examples. This is a 401k, a 403b, a 457 deferred compensation account, a traditional IRA, right. These are all types of tax-deferred vehicles. And how these work is you contribute money today with pre tax dollars. So you haven't paid any tax on it. It grows tax-deferred, so you don't pay tax while it's growing. All that sounds pretty good, right? But the caveat is, is that when you go to take money out, it is taxable at your highest marginal bracket, okay? You have to pay taxes on every dollar that you withdraw. And there are certain IRS guidelines you have to follow. What are those? Means you can't take money out in most cases before 59 and a half without having a penalty from the IRS. And at the same time, you have to start taking money out by the time you're 72. 


Now today, as of today's webinar, today, the rules around required minimum distributions say that you have to start taking money from these accounts at 72. There are a couple of bills that are being passed around right now that may go into effect that may extend that to 73, and possibly even 75. So yes, these rules can change, these IRS guidelines can change, but we do have to make sure that we're following their rules. The other type of tax-deferred vehicles that we see are with after-tax dollars, we don't see these as much. But these examples would be non deductible, IRAs and non qualified annuities. So with these accounts, you put money in today that you've already paid tax on, it grows tax-deferred, so you don't pay any tax while it's growing. And then the gains are taxable when you go to make a withdrawal. So only the gains are taxable when you go to make a withdrawal from these accounts. 


Now let's talk about taxable, taxable. These are investment accounts. I'm gonna give you some examples. Money market funds, CDs, mutual funds, maybe you have a brokerage account with stocks or bonds, real estate rentals, right? These are all taxable, or I call them tax as you go. Because these are funded with after-tax dollars, pay the tax today and you put money into the account. But then as it's growing, you may have to pay tax. So and we actually were just having this conversation with a client yesterday. So how does that work? Well, if you've got investments, let's just pretend for a second you have a brokerage account, that's stocks and bonds. And as dividends come into the account or interest payments are made on those bonds, that is actually considered taxable income to you, even if you don't take the money out of the account. 


Because most people have those dividends and those interest payments reinvested back into their investment account, it actually helps your account grow over time. But the negative is that you have to pay tax on that. The other way that you're taxed from capital gain distributions. So if you do make any changes in the portfolio, or whoever's managing it, or the fund manager makes changes to, they're buying and selling, right, you can have realized capital gains. Which means you have to pay tax on those gains that were earned in that year, even if you didn't take money out of the account. Okay, we were just having that conversation yesterday with a client, and they have some money invested elsewhere. It's not with us. And they weren't aware, they didn't know. They knew they were getting these 1099s, but they didn't quite understand how they were having a big tax bill, even though they weren't taking money out of the account. 


So you can do some interesting things with this type of account when it comes to the income side. Okay, I don't have as much time to go into that today. But maybe that's another webinar, we would have some time in the future, talking about how you can use these from a tax efficient standpoint, when you get to retirement. Here's where we're going to spend the most of our time today. And that's going to be on tax-favored or tax-free accounts. So the way these work is you put money, you fund it with after-tax dollars, okay? So you pay the tax today you put money in, and it's going to grow tax-free, so you don't pay taxes while it's growing. And this is the best part, income and withdrawals are also tax-free. Okay. So basically you pay the tax today and you don't have to pay taxes ever again. 


Now, some examples of these accounts. Municipal bonds, Roth IRAs, 529 plans and cash value life insurance. Okay. And then there's you could also say HSAs health savings accounts if you are eligible to have one of those as well. Okay, we don't talk ask too much about municipal bonds, because the interest that you earn is pretty low. So we don't talk too much about those. And then also, if you live in Florida, we don't have any state income tax. So we don't look at municipal bonds as much here in Florida. And 529 plans are just for college savings. Okay, so it is they are tax-favored, but it's just for college savings. And I also mentioned the health savings accounts. But those are just for health care expenses. Okay. These are all examples of tax-favored accounts. We're going to spend most of our time today talking about Roth IRAs and cash value life insurance.


So let's talk about tax planning strategies and what you should be thinking about, because the accounts that you choose to use for your retirement income will be depend on where you think your taxes are going to be when you retire. So if you think that your taxes in retirement are going to be higher than they are today, then you want to focus more on these tax-favored accounts, like Roth IRAs, and cash value life insurance, okay. Because remember, you pay tax today, and then it grows tax-free, and you can take income out tax-free. So in this case, we prefer to pay tax today at a lower rate, and then have, enjoy tax-free income in retirement. So this is really for those who think, again, that their taxes are going to be higher in retirement. How does that work? How do you have higher taxes in retirement? 


Well, a couple different ways. Your income goes up over time, okay. Or you could, the tax rates could go up. And for most people, like I said, by the time you start considering if you have a pension, Social Security, you start taking money out of your retirement accounts for required minimum distributions, most people will have higher income in retirement. And those cases, we want to focus more on these tax-favored assets. But on the other hand, if you think your tax rate is going to be lower in retirement, then you should favor those tax-deferred accounts like the 401k, like the 403b. In this case, you're willing to take the chance that your taxes are going to be lower in retirement than they are today. And you're using these accounts to take advantage of that tax deduction that they offer. Okay. 


So like, just this week, I was talking with someone and she is putting a good bit of, she's contributing a lot to her 403b through work, she's maxing it out, she's putting in as much as she can. And we walked through and said, hey, does this actually make sense? Where's your tax rate going to be in the future, and she's actually going to have more income when she retires than she does today. So what that means is she's doing that reverse tax planning. She's deferring tax at a lower rate today, just to pay higher taxes later. Now, and that's just based on her income. It's not based on what happens with tax rates, right? Like this is just her current income. So if you take into consideration, higher taxes in the future, she's going to be paying even more. So we had to stop doing that. And we're gonna, we're gonna do some different things. We're going to focus more on those tax favorite assets while she's still working, to give her some balance, right. To give her some options and not have it all in their retirement accounts, the pre-tax retirement accounts. 


Now, there are lots of different ways that you can pay for retirement. That you can, lots of different ways that you can have, that you can take income from retirement, and most people think of that 401k plan, they think of that 403b, that 457, they think of their pension, Social Security. But there really are a lot of alternatives for retirement savings. Okay, you could use a CD. Now, it's kind of a little laughable, right? Because CDs aren't paying a whole lot these days, but you can use a CD. In fact, with interest rates being as low as they are, that's one of the challenges we have is the days of just putting your money in a CD, or putting your money all in the bonds and clipping those coupons, right? It has gone away. It's gone the way of the dinosaur. That doesn't exist in our world today. So that is one of the challenges we have when it comes to retirement planning. But you can use CDs, there are some mutual funds and municipal bonds we talked a little bit earlier. IRAs, Roth IRAs, right. There's different advantages with each alternative. 


But some strategies are often overlooked. And those are Roth IRAs and then the cash value life insurance. Okay, so we're going to look at, talk about both of those strategies today to see if it's something that would benefit you for your plan. But before we do that, I want to show you this case study. I want to talk about the impact that taxes have on your income. So we're going to look at an example here. This top example we're gonna say someone took $100,000 out of their retirement accounts. Now, we're assuming they're taking it from a 401k, right. And every dollar again, out of a 401k is completely taxable. So what we're looking at here is that this chart shows you if you took $100,000 out of the 401k. And if you are in the 32% tax bracket, then you've got to pay $32,000 in taxes. And that would leave you a net income of $68,000, for you to enjoy. That's $68,000 in your pocket to spend in retirement, right. To take that trip, to remodel the house, right. 


But let's look at some different options. Because as I mentioned earlier, tax diversification means that your money is mixed throughout multiple categories of accounts. And that strategy allows you to have flexibility and choices when it comes to determining how much you will be taxed in retirement. So instead of taking it all out of the 403b, or the 457, or the 401k. What if we took some from that tax deferred account like that 401k. And we took half from something else, like a Roth IRA, or cash value life insurance. Look what happens here. Now on $50,000, you don't pay any tax at all, okay, and you're only paying tax on what comes out of the 401k. So now, instead of $68,000, you have $84,000 per year to enjoy in retirement. Right. That's $16,000 more in your pocket for you to enjoy. That's a big difference. And it's all comes from having tax diversification. From having your money in different types of accounts. So important. 


So let's dig in. We're going to talk about Roth IRAs. I get a lot of questions about Roth. I think I have, I'm getting more questions this year, and last year too, last year and this year about Roth than at any time in my career. So what is a Roth? A Roth IRA is a investment vehicle where you contribute with after-tax dollars. And it does not, you know, pay any tax while it's growing. And then the income comes back to you tax free when it's structured properly. And we're going to talk about what that looks like. You can use a wide range of investment vehicles for your Roth. We have a whole buffet, if you will, we have a whole list of different types of accounts you can use for the Roth. And one thing is that we like about Roth is obviously the tax advantages. But there's also less, less requirements and less restrictions on these accounts about what you can and can't do. 


So let me give you an example. There's no required minimum distributions. What does that mean? That means the IRS, again, this is as of current law, but the IRS will not, will not tell you that you ever have to take money out of that account. You're never forced to take money out of the Roth IRA, okay, like you are with your pre-tax retirement accounts. And then also, if there is money leftover to go to beneficiaries, if there is money leftover that goes to your spouse, or it goes to the kids, it goes to them tax free. So it's a tax-free benefit, not only to you while you're taking income out of the account, but whatever's left goes tax-free to your beneficiaries. So how do we fund a Roth? There's a couple of different ways you can do that. You can contribute, basically, you can have a Roth IRA, and you can contribute money every single year. Now to do that, you do have to have earned income. And that's what I was telling the client yesterday, is that you have to be working, you have to have earned income to be able to contribute to a Roth. 


Now there are limits. There's a limit about how much you can put into them. And there's also income limits. So if you make over a certain amount, you're not allowed to contribute to a Roth. So we want to make sure that we follow all of those guidelines. The other thing that you can do is you can convert your pre-tax accounts to a Roth IRA. So we're going to talk about what does that look like. How to Roth IRA conversions work. When you're doing a Roth IRA conversion, you're actually taking a pre tax retirement account, okay. That could be an IRA, a 403b, a 457, a 401k, and you're actually turning it in to a Roth. So it's going to go from that pre-tax retirement vehicle to now be a Roth IRA. And whatever amount that you convert is going to be considered taxable income for the year that you convert it. So here we are in 2022, let's say you had $250,000 in your IRA, you convert all of that to a Roth, it's all considered taxable income for this year. It gets added on top of your other income, and you'll have to pay taxes based on your tax bracket. 


So here's a couple questions that you want to ask. How will you pay the tax? Okay. How will you pay the tax? Are you going to pay out of pocket? So I've got money in savings, and I'm gonna use that to pay the tax so that I have more money in my Roth to let it grow tax-free and have more tax-free income later, okay? Or are you going to have the account pay the tax, because you can do that as well. So if I have my $250,000 in my IRA, and I convert it to a Roth, I can tell them to withhold whatever amount for taxes, and then they'll take, they'll send that to the IRS, and whatever's left will now be in the Roth. There are some key questions that you want to ask yourself before, you know, should I convert my pre-tax to a Roth? Okay, so here's a couple questions you want to ask yourself. 


When will you need to take income from this account? So if you converted it today, in 2022, when are you actually going to need income from it? Do I need income from it right away? Can I let it continue to grow? What is that going to look like? Because you've got to do a cost analysis to figure out, is it worth it to do the Roth conversion? Is it worth it to pay all those taxes today, to let the account now grow tax-free? And a lot of that comes down to when are you going to take income from the account? And how much will you be taking out? The other question is how's it going to be invested? Sometimes I see people with Roth, I'll be honest, they do not have them invested properly. Especially to take advantage of all that tax-free growth, they do not have it invested in a way that makes sense for their overall plan. And we see that a lot. We see where decisions are made in a vacuum, and they decide in this one account how it's going to be invested without taking into consideration the whole picture, okay. Something you want to make sure that you look at. 


Let's talk about when is the best time to do a Roth conversion. Actually, now's actually a pretty good time. And one of the best times to convert to a Roth is when the market is down. Okay, or if you have a tax loss in one year, that's also a good time to do a conversion. But let's think about if the market is down. So, you know, I said earlier, I had, you know, $250,000 in my IRA, and let's say that now, you know, the market is down 10%. And if I convert at this lower amount now, right, my account value is down, I convert that, I'm converting a less amount, I'm paying less in taxes. Now it's in the tax-free account. So as the market comes back, it's going to get, it's going to have all of those market gains, it's all going to come back tax-free. Pretty neat. So when to convert, is when the market is down is actually a really good time to talk about doing a Roth conversion.


Roth IRAs also have what's called a five year rule, okay. And here's, I'll give you kind of the basics for this. This is, remember I said earlier about how it's tax-free as long as it's structured properly. What that means is they have this five year rule. So contributions, money that you're adding to your Roth are always tax-free. Converted funds are also tax free. But you've got to make sure that you're over 59 and a half and had the account for at least five years for you to take any earnings out that will be tax and penalty free. So again, it kind of goes back to that when do we want to start taking money out of the account? And how much are we going to be taking out as well? So we got to pay attention to this five year rule. 


We're gonna switch gears now and we're gonna talk about the other vehicle we mentioned earlier. So we've kind of been, we're going to wrap up here on Roth IRAs, and then we're gonna switch over and start talking about the cash value life insurance and how you can use that also for tax-free income in retirement. So life insurance is often overlooked when it comes to using it as a retirement savings vehicle. Most people think of life insurance, where it has this death benefit, right? Where it has this, it protects the family and protects the business in the event of someone dying. That's what we call the policy's death benefit, but that's how most people think of life insurance, right? There's this death benefit that comes into the family tax-free if I die. 


And that's true. Okay. So for me, I'm 38, I have two boys. They're five and eight. Actually, today's kind of a fun day, because today is take your son or daughter to work day. So my, my eight year old, Eli is actually here with me, and I had him helping me with a few things. So that's actually been a lot of fun. But yeah, so I'm 38, I'm married and the two small kids. So I do have a good bit of term insurance to protect my family, right. Because if something happens to me, tomorrow, I die tomorrow, I can't get up and go to work tomorrow, then my family suffers an economic loss. And especially with the two boys, you know, I have this responsibility to make sure that they're not gonna be financially destitute, because of something like that. So I do have term insurance for that. That's not what we're talking about here, okay. We're talking about permanent life insurance, that builds up cash value. 


So permanent life insurance has what we call living benefits. And policy owners are actually able to access that cash value, cash builds up in the policy, and they can use that cash for a bunch of different reasons. One of those is to supplement their retirement income. And that's why this is a very versatile tool, because it can kind of help you at different stages of your life. So let's talk about how this, these policies work. Life insurance is viewed as a benefit for society, okay. It's a social good. And that, because of that, it has significant tax benefits that does not apply to most other financial institutions. This includes, you've got this, I'm sure most of you are aware, when you have a life insurance policy, there's a death benefit. And that death benefit comes in tax-free to the family, okay. There's not many assets that are really going to come in tax-free. We've been talking about a few of them today. But that death benefit comes in tax-free. 


There's also cash value that's building in the policy, when you pay a premium, part of that goes into cash, you also have a dividend that can build up cash as well. And that grows tax deferred. And then you can take the money out as well on a tax-free basis. Again, as long as all of that is structured properly. So again, there's a few more benefits than just the tax side, we did talk about the death benefit how that gives protection, in case of someone dying, right. Provides protection for the family or for our business. The cash value can actually be seen as a asset to your portfolio. And another way to say that is it's considered a non correlated asset. What does that mean? It means that cash value is not correlated to the stock market. So when the S&P is down, 10%, and bonds are down 9% year to date, cash values of these life insurance policies are not down. They actually never have a bad day. 


Okay, as long as we're, they you know, they have dividends, there's contractual guarantees, there's a lot that goes into it, but they do not go down in value unless you're starting to take money out of them. I mentioned the dividend, some policies can have a dividend. And then some of the other benefits is that you can withdraw money at anytime without a penalty. So you don't have to wait till you're 59 and a half like you do with some retirement accounts. There's no required minimum distributions. So the IRS is never going to tell you hey, you have to start taking money out of this, right. There's creditor protection. Depends on what state you're in. But in the state of Florida, for example, you have 100% protection from losses and creditors with your cash value life insurance. And we can also add long-term care, so that you have some long-term care protection as well. 


So today, we've talked about how you can use these different types of investments, these different types of vehicles, so that you can have tax diversification, which means you can have more income in retirement because you're paying less in taxes. So no matter where you are, no matter if you think you can wait or not, you have to be proactive with your money. You have to be proactive with your decisions, so that you can know what your choices are, right. We find that a lot of people make decisions based on feelings. And we believe we should make decisions on facts. So what does that mean? It means, I want you to know, I want you to know, what are all my options? What are all the opportunities available to me. So I can decide by having all the information what is best for me, what is best for my family. 


So just imagine for a minute, let's just say you wanted to buy a house, and you want to buy this house three years from now in 2025. But over those next three years, you don't think about it. You don't look at your income, you don't see how to get a loan, you don't care about your credit. You don't try to research and figure out how much am I going to need for a down payment? Or what will those closing costs be? You don't look at any of it. And then if we fast forward it those three years to 2025, I've got news for you. You're not buying a house, right? Because you're not ready. But let's think about it, if you were proactive. 


So again, you want to buy this house three years from now. So what if over the next three years, you start meeting with realtors and mortgage brokers and you start gathering information? You start researching what city do you want to live in? What kind of house do you want? Do you want to live in a neighborhood? What kind of neighborhood? Do you want to live in a family friendly neighborhood? Do you want to live in one that's only 55 and up? Do you want to live in a townhouse? Or maybe you want to live in a condo downtown somewhere because you want the city life feel? Maybe you want to have some land, you don't want to live in the city at all. And you want to have more of a rural lifestyle and have land right? 


So you start thinking about where is it that you want to live? What sort of house do you want to be in? Start looking at what the price ranges for those houses. What are your options are going to be? How am I going to finance this. And you start really working through all that. And if you do that, if you take the time and you're proactive, right, it's going to make all the difference in the world to your planning. I've got news for you that person they're finding house three years from now, they're actually probably buying it beforehand. Because they'll have done the research they'll have, they'll know what their choices are, they'll know if there's any tweaks they need to make between now and then. And they'll know. They'll know what their options are. And it makes all the difference in the world. 


Now today, we have talked about some very specific strategies that you can implement. But here's the hard question. How do you know that they're right for you, for your situation, and which one is better? Right, we talked about Roth IRAs, we talked about different ways to have a Roth, we talked about cash value life insurance. Are one of these strategies a good fit for you? That's the question. And I'm gonna say this again, too. It's incredibly important that you don't do these without seeking professional advice, so that you don't make that big mistake and have that tax issue. So I'd recommend that we schedule a time for a strategy session, so that we can help you get clarity about your financial goals and concerns. We can get clear about what opportunities are available to you specifically, what are one of the one of the strategies, we talked about. Would one of those work for you. 


But what's holding you back? What's the roadblocks in your way from having, being able to enjoy life, being able to enjoy this retirement that you want? And what specific steps do you need to take to save time and money, and what if you can get there even faster? Like I mentioned with the person buying the house, what if you could buy it in two years instead of three. Think about all the difference that would make in your world. But I'm going to be honest for a second, I don't know if we're the right fit for you, because we're not the right fit for everyone. But what I can tell you is that if we schedule this strategy session, we will be able to determine if it's a good fit for you. Okay.


And how, you know I get this question sometimes if, how do I know if this is a good if I should have a call or not? Okay, so this strategy session is for you, if you're motivated, if you're committed to reaching your goals, you know, I want to figure all this out so I know my retirements gonna look like and I can have the life that I want in retirement. If you're coachable and you're willing to be open-minded and learn new ideas, and if you take action, okay. We love working with action takers to make sure like, hey, we're gonna do this work and help you with it. But we need your help, too, right? I can't do it all for you, I need you to do your part. And then this is not for you, if you're not coachable. If you're not willing to listen to other ideas, and if you're just expecting some unpaid consulting. 


So let's talk about the best ways to schedule a call. This would be a 30 minute call, okay, usually, we're wrapped up in 20, 25 minutes. And there's really a couple different ways that you can do that. You can call our office directly at 850-562-3000. Okay, that's our direct line here. 850-562-3000. You can also go to our website, which is www.johnhcurry.com. And there's going to be a button that says schedule a call. Actually, if you just go to johnhcurry.com/call. It'll take you right there. And you'll be able to pick out a spot on our calendars. I will send a follow up email as well. And that will include the link so that you can can book a call, too. And feel free to let me know if you had any questions. I know we went through a lot. So there may be some questions that come up. But I just wanna say thank you for taking the time to be on the call with us today. I hope you found it impactful and look forward to speaking with you all soon.


Voiceover: If you'd like to know more about John Curry services, you can request a complimentary information package by visiting Johnhcurry.com/book. Again, that is Johnhcurry.com/book. Or you can call our office at 850-562-3000. Again, that number is 850-562-3000 John Curry, chartered life underwriter chartered financial consultant accredited estate planner Masters in Science and financial services certified in long term care. April Schoen and John Curry are registered representatives and financial advisors of Park Avenue Securities LLC. Securities products and advisory services are offered through Park Avenue Securities, a registered broker dealer and investment advisor. This firm is an agency of the Guardian Life Insurance Company of America, Guardian, New York New York April show and as a financial representative of the Guardian Life Insurance Company of America guardian, New York, New York. Park Avenue securities is a wholly owned subsidiary of guardian, North Florida Financial Corporation is not an affiliate of or subsidiary of Park Avenue Securities. Park Avenue Securities is a member of FINRA and SIPC, this material is intended for general public use for providing this material we are not undertaking to provide investment advice or any specific individual or situation or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. All investments contain risk and may lose value. Past performance is not a guarantee of future results. Guardian, its subsidiaries, agents or employees do not provide legal tax or accounting advice. Please consult your attorney, accountant and or tax advisor for advice conThe Living Balance Sheet and the Living Balance Sheet Logo are registered service marks of the Guardian Life Insurance Company of America, New York, New York Copyright 2005 through 2022. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities or Guardian and opinions are stated or their own.

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