Tax Efficient Retirement Planning

There are four tax free items to consider for retirement planning: Health Savings Accounts, Roth IRAs, Reverse Mortgage Income and Cash Value Life Insurance. In addition, these four items are not included in the provisional income test for Social Security benefit taxation. 

Cash value life insurance has four policy platforms to choose from based on your financial suitability, risk tolerance and time horizon hold positions: Participating Whole Life, Universal Life, Indexed Universal Life and Variable Universal Life. The policies must be designed with the least amount of death benefit, complying with the TAMARA provisions that regulate cash value policies designed for accumulation.

Conservative investors may consider participating whole life or universal life. More moderate investors may consider indexed universal life. And more aggressive investors may consider variable universal life.

The most popular policy platforms are partipating whole life and indexed universal life. Participating whole life is based on interest rate performance of its bond portfolio and annual dividend declaration. The dividend in this case is a return of unused premium. Indexed universal life is based on call options paid by the annual interest rate credited from its bond portfolio. If the options are profitable the gains are credited to the policyholder’s account. If the call options are not exercised, then the account generates zero, but not a loss.

The tax-free income from these types of TAMRA compliant policies are generated in two forms: withdrawals to basis and collateralized policy loans of gain. To maintain the tax-free status of the policy, it must remain in force for the life of the policy insured.

Contributions from the book Index Investing in this press release are used with permission from Light Bulb Press.