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Missed Fortune – If Taxes Go Higher Will You Be Prepared?

Posted on | October 21, 2012

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Is a Double Dip Recession Straight Ahead?

Many of us have an eye on the upcoming election and are wondering what how it will impact our economic future.

It’s a good time to be paying attention wise to such things. Did you realize, for instance, that back when president Obama took office, if every American taxpayer had written out a check for his or her equivalent share of the national debt, it would have amounted to about $92,000 per taxpayer?

Four years later, that check would total roughly $160,000 for each of us due to the most unprecedented run up in the national debt our nation has ever seen. If Obama is reelected, that amount may soar to well over $200,000 per taxpayer in the next four years. There’s a high chance that we will go into a double dip recession complete with continuing high unemployment.

On the other hand, if Romney is elected, his knowledge of economics could result in a slow down of government spending, but even he will not be able to balance the federal budget immediately. The reason for this is that the IRS only collects about $2 trillion a year in tax revenues. But that amount only covers the costs of interest on the national debt that’s over $16 trillion and the entitlement programs such as Social Security and Medicare.

The 2013 federal budget will still have a $1.3 trillion shortfall and that is money that will have to be borrowed.

If Obama is gains reelection and sticks with his existing policies, a double dip recession may result. If Romney is elected and successfully slows government spending, a recovery may begin, but it will still take years to see real improvement. No matter who is president, it will be extremely difficult to reverse the damage that has been done thanks to all of this debt.

Either way, you better have a dream solution in place to protect your money and your future regardless of who ends up leading the country. High taxes will continue to be a challenge for the foreseeable future. So you’d better get planning.

A Tax-Free Nest Egg Is a Good Thing

To deal with the challenges of high taxes, you must understand the distinction between accumulating your retirement savings in a tax-free vs. a tax-deferred manner.

Though tax-deferred IRAs and 401(k)s are a preferred method of saving for the future for many Americans, they are not the answer to high rates of taxation. People who have been faithfully placing their retirement money into these retirement vehicles will see Uncle Sam take a third of their savings in taxes.

One option for countering this threat is the strategic rollout.

With a strategic rollout, you’ll move your nest egg out of the tax-deferred vehicle and into a tax-free vehicle. Doing this as early as possible is essential in that you’ll have to pay a tax liability when you move your money. However, once you’ve moved it into a tax-free vehicle, it will accumulate tax-free from that day on. You’ll pay no further taxes on this money when you access it at retirement. And ultimately, when you pass away, the money will transfer tax-free to your survivors.

In a tax-free environment, your money can enjoy the true power of the miracle of compounding. This miracle alone could mean the difference of a nest egg of $500,000 and a million dollar nest egg. That million dollar nest egg could generate 8-10% payout rates at retirement. That means you could be enjoying $80,000-$100,000 a year in income that is tax-free under certain grandfathered sections of the IRS code.

No one wants to find that they are in danger of outliving their retirement savings. But those who fail to plan just might have a rude awakening.

But there are simple, proven strategies that allow you to protect your money from the effects of high taxes by accumulating your nest egg in a tax-free environment. The upcoming election may shift the direction our country is headed economically, but a wise person will have their ducks in a row just in case.

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

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