Most people with qualified money grapple with the inevitable tax burden that comes along with it. Deferring taxes during your highest earning years seems to make sense on the surface but you cant help but wonder if this strategy may backfire. All indicators are that the tax burden will increase, even for those in retirement. So what can you do with qualified money?
For those that are planning on leaving their qualified money to heirs and have no plans to use it for income, there is a strategy worth consideration. It is packed in a number of different ways but at the end of the day, the concept is pretty straight forward. Use the money to create an income stream and use the income stream to purchase a large life insurance policy. (Death benefits from life insurance are not taxable and they provide instant leveraging which is what makes the strategy work)
There are a few keys to this strategy- The most important one is that you must be in relatively good health to use it. If you have a major health condition, move to a different strategy. The 2nd is that you must find the life insurance company with the best leveraging for the amount of death benefit and your age. The third is that you need to find an annuity that pays out very well. The highest paying indexed income riders or highest paying SPIA’s are essential.
There are other factors but if you address the three big ones listed above, you can easily obtain a guaranteed internal rate of return of 6% to 8%.