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Financial Planning > Tax Planning

The opportunity of a lifetime (part 1)

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Previously, I’ve identified challenges your customers will face in the future. I promised to provide strategies to overcome and take advantage of those challenges. Insurance and financial professionals have knowledge and products that can assist Americans to both survive this crisis and achieve the financial independence necessary to prosper.

First, you have to understand the problem. That’s why we arm you with information concerning Social Security, Medicare, Medicaid, taxes, health care, deficits, debt, etc.Then you must inspire prospects and clients to take action. You can show them how to not only survive but thrive in these trying times. You have incredible value.

Lead your prospects to make an emotional commitment. Provide a variety of solutions. People fear change and they fear making a mistake. A well-explained and understood strategy promotes action. Here’s an example. A recent “60 Minutes” segment declared the housing crisis only one-third complete. As many as 70 percent of hybrid “teaser” mortgages will default. Some mortgages are defaulting before they reset. Commercial real estate faces similar challenges. Many mortgages reworked with bailout money have already fallen behind again.

I find the best way to start a discussion about this information is by asking questions. Is homeownership the American dream? Are homes a good investment? Are home ownership and real estate investment appropriate strategies for retirement saving? Prospects easily conclude the answer is “No.”

That’s when I explain the virtues of investing in Roth IRAs. People adore this concept. However, many prospects are ineligible to contribute because they have a pension at work, or their income is too high, etc. That’s when I explain that the government has provided an alternative strategy: a non-deductible IRA. Inspiring every prospect to take advantage of this opportunity creates a stepping-stone to the greatest opportunity of all. In 2010, you may convert your non-deductible IRA to a Roth IRA without income consideration. No tax is due in 2010. 50 percent of the tax on the gain is due in 2011. The final 50 percent of tax is due in 2012.

You can turn money that would have been taxable in the future into non-taxable forever, and you paid the tax at historically low tax rates. Taxes are on sale right now! If you believe taxes will be dramatically higher in the future, as I do, this is a great strategy.

Next month, in part 2, I will explain additional benefits making Roth conversion strategies magnificently compelling for your clients.


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