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A Savings Vehicle That Makes All the Difference

Missed Fortune – Some Things Are Important But This One Is Urgent

Posted on | February 24, 2013

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Stop Standing In Your Own Way

One of the most searching questions that we can ask ourselves is this one: If something you’ve always thought to be true turned out to not be true or accurate, would you want to know about it sooner or later?

Sometimes the answer isn’t simply about something being true or not, but between good, better, and best. This is of great relevance regarding how a person chooses to save for retirement.

Good could mean saving for the future in IRAs or 401(k)s where your money is exposed to the volatility of the market and running out of money in 7-11 years after retiring.  Best could mean taking that same net spendable income and creating a nest egg that you could never deplete even if you lived to be 120 years old.

This is why it is so important to understand the difference between good, better, and best. There’s an old saying that goes, “When you’re standing in your own way, what does it matter what other obstacles you face?”

When it comes to your retirement, the major obstacles include higher taxes, market volatility and rising inflation. But simply knowing about these obstacles isn’t enough, you’ve got to get into motion and become educated as to how to remove them from your path to a brighter future.

The sooner you get going, the sooner you can move toward your dream. Even a decade can make all the difference in the world when you’re moving toward your goal at a steady clip. Those who put off taking action tend to kick themselves later when they realize what they could have had.

The Difference Between Important and Urgent

When we refer to the time value of money, we’re talking about the costs associated with putting things off today that could make a huge difference in the future. Every month that we fail to take steps to immunize our retirement savings from the effects of inflation, higher taxes and market volatility, can cost us tens of thousands of dollars in long-term benefits in the future.

If you had a water leak that was costing you $100,000 every 90 days, would you not consider that an urgent matter to address, or would you only consider it important?

Many people have the equivalent of tax leaks, inflation leaks, and market volatility leaks in their retirement savings, but they don’t yet realize what those leaks are costing them in the long run.

The threat of possibly outliving their money, or paying unnecessary taxes, seems far off in the future. But those who fail to act will see the long term cost in lost resources if they continue to procrastinate.

It doesn’t matter if you are in a low income, middle income, or high income situation; taxes are going up for everyone. Political leaders are finally beginning to admit that their unwillingness to rein in spending means that they’ll have to extract more revenue from the taxpayers. This means that taxes are certain to rise.

They’ve already taken a small jump for everyone with the hike in FICA rates just since the first of this year. And more hikes are on the way.

While we each should pay our fair share, we should also understand that there are perfectly legitimate ways to direct otherwise payable taxes into causes that are important to us.

These are sections of the IRS code that have been around for more than 100 years. Other tax laws change, but these have been grandfathered in and provide a savings vehicle where you are immunized from the effects of higher taxes.

Your money will accumulate tax-free. It will be tax-free when you access it at retirement. And at the end of your life, it will transfer to your family, your church, or your favorite cause, tax-free.

When you are immunized against the effects of higher taxes, rising inflation, and the effects of market uncertainty, you can enjoy liquid assets safely earning a predictable rate of return that will safely carry you through your golden years.

Making this a reality requires action. The first step is to visit 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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