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Missed Fortune – Gaining the Advantage Against Higher Taxes

Posted on | March 24, 2013

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The First Tax Hikes Are Already Being Felt

As of January, we’ve just seen the first major tax increase in nearly 20 years for high-income earners. But all of us are feeling the pinch caused by the expiration of the payroll tax cut on employee FICA and Medicare withholding. Those rates jumped from 4.2% back up to 6.2%. This effectively means that most Americans are seeing a nearly 50% increase in the amount withheld from their checks for Social Security and Medicare.

There were also noticeable increases in capital gains and dividends for high-income earners like married couples that file jointly and earn over $70,000 annually. This also affected single earners making more than $35,000. The capital gains increased from 15% to 20%. And, finally, there was a phase out of the itemized deductions and the addition of a health care surtax of 3.5% that went into effect on all investment income.

This realization of higher taxes is causing many Americans to take notice of what is happening and to think about what can be done to immunize themselves from the effects of future tax increases.

Many of them are choosing to abandon the tax-deferred vehicles like IRAs and 401(k)s where they’ve been saving for their retirement and doing a strategic rollout that repositions their nest egg where it can accumulate tax-free.

People who have chosen to keep their retirement money in IRAs and 401(k)s will not have this luxury. This is because their money is being accumulated in a tax-deferred vehicle that will subject them to those anticipated rising tax rates the moment they begin taking their distributions. If this wasn’t enough, they’ll also be wrangling with the effects of rising inflation that is steadily shrinking the purchasing power of every dollar they’ve saved.

Immunity from the triple whammy of higher taxes, rising inflation and continuing economic uncertainty comes from learning and applying the right strategies and not simply following the herd.

Tax-Advantaged Growth Is the Way To Go

Would it surprise you to know that DALBAR is reporting that most mutual fund investors have only averaged 3.49% during the past 20 years? Not only is that a dismal rate of return, but also whatever money they did accumulate was taxable.

Those who have invested the time and effort to become educated understand that the best way to avoid higher taxes, market volatility, and rising inflation is to utilize the strategy of indexing in maximum funded tax-advantaged life insurance contracts.  It’s how they can maintain liquid assets while safely earning predictable rates of return.

Facing the prospect of tax hikes, some folks are moving their retirement savings away from tax-deferred accounts like IRAs and 401(k)s. Many use a strategic rollout to reposition their nest egg to a vehicle where it can grow tax-free. These maximum funded tax-advantaged Insurance contracts that have been grandfathered into the IRS code for generations. In them, your money grows tax-free, transfers tax-free when you access it at retirement, and is tax-free when it goes to your heirs at the end of your life.

To understand the difference this tax-free growth makes, consider the following question.

If you had a $500,000 nest egg in your IRA or 401(k) 12 years ago, is it worth $1.5 million today? If the answer is “no” then it’s time to pay close attention.

Because that’s the kind of growth that was accomplished in maximum funded insurance contracts.

There’s a reason that affluent people and banks and corporations put their tier 1 assets in Bank Owned Insurance Contracts and Corporate Owned Insurance Contracts. They maximum fund it and take the minimum death benefit for the tax-free accumulation and growth.

There’s no shame in not knowing what you don’t know. But if what you always thought to be true turned out not to be true, how soon would you want to know about it? If you’re serious about eliminating the dangers of rising taxes, you need to understand what even many professionals do not.

Learn how to take charge of your future by visiting with a wealth architect today.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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