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A life insurance strategy that helps diversify your taxes during retirement

By late 2019, the average pension fund had 85% of the funds necessary to meet its obligations over time due largely to low interest rates

63% of companies with defined-benefit pensions "are considering termination"

The number of pension plans offering defined benefits – which means the payouts are guaranteed – plummeted by about 73% from 1986 to 2016

That's due to a mix of reasons, including risk, costs, declining union power and the rise of 401(k)-style defined-contribution plans, which require workers to kick in their own funds for retirement investments, often with a company match.

What has been the secret to success?

Tax-Deductible Tax-Deferral

401(k), 403(b), 457, Traditional IRA

What makes tax-deductible tax-deferral work?

It worked before. . .

• Tax rates were high in the 1940’s – 1970’s
• Tax rates dropped dramatically in the 1980’s
• Lower retirement income meant lower retirement tax rate

Will it work now?

• 401(k) contributors had much lower tax rates in the 1980’s and 1990’s
• Today there’s pressure for tax rates to increase
• Increasing levels of wealth for financially successful retirees
• Because of personal savings in 401(k)s, IRAs, etc., retirees now own significant assets that will be passed to their children
• income tax implicationsChildren’s tax rates are rising, creating significant

RMDs vs. Account Value

This graph illustrates IRA RMDs as a percentage of the IRA Account Value. This is the reason that IRAs reach a peak value and then decline. . . Because the RMD distribution amount coming OUT eventually becomes larger than the annual earnings going IN.

Since many IRAs are forecasted with earnings in the 6% to 9% range, you can see that the IRA will commonly reach a peak value between age 83 and 90. At that point the RMDs exceed the annual earnings and the account value begins to decline.

A life insurance strategy that helps diversify your taxes during retirement