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Life Health > Life Insurance

It's all about taxes

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Do you remember the four questions I implore you to ask every person you come in contact with? They are:

  • Do you think taxes will be higher in the future?
  • Do you think benefits will be lower in the future?
  • Do you believe inflation will be a significant problem?
  • Will volatility harm your investments and retirement?

While they are all spectacular queries, the question that gets the most beneficial response is the first one: What impact will taxes have on the success or failure of your investments and retirement?

Many agents and advisors don’t realize how many sales pass them by because they do not understand income taxes. They miss opportunity after opportunity to convert taxable money into non-taxable money.

Poor job

Our industry does a poor job of explaining why paying taxes now could be more beneficial than paying taxes in a higher or much higher tax environment in the future.

According to Ed Slott, the number one benefit in the tax code today is the tax benefit afforded cash value life insurance. If you haven’t attended one of Ed’s seminars, then you are missing the chance to improve your career. He is one of the finest speakers in our industry. He explains tax strategies and pitfalls in easy to understand and many time humorous phrases. Attendance at his seminars is well worth the money many, many times over. He has clearly contributed to my continuing success.

See also: 10 life insurance tax facts you need to know

You cannot sell tax-preferenced products such as life insurance and annuities without understanding taxes. It’s that simple.

Here is a small example.

The standard deduction ($14,200) and personal exemptions ($3,800) per person for a couple over age 65 filing jointly is $21,800. Let’s say this couple can live on their Social Security and a $10,000 RMD that they are required to withdraw.

But they could withdraw another $11,800 of fully taxable IRA money or gains from an annuity and still not pay income tax on the withdrawal. If nothing changed, you would eliminate taxes on $236,000 over a 20-year span.

Couldn’t you relocate that $11,800 per year into an annuity or a combo life or annuity that provides long-term care? Could it fund an annual premium life insurance policy of substantial value after seven years that would provide both death benefit and access to cash value?

I will expand on this idea next month. In the meantime, I recommend going to the website and printing the entire 1040 instruction booklet. You might even get one at your local library or post office. READ IT! Make sure you understand these items:

  • The Standard Deduction
  • The Personal Exemption
  • Individual and Married Tax Brackets
  • Social Security Tax Levels

For more from Van Mueller, see:


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