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Missed Fortune – Rethinking What Everybody “Knows” About Saving For the Future

Posted on | January 13, 2013

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Everyone Gets To Feel the Tax Increases

We’ve just seen the first major tax increase in nearly 20 years for high-income earners. But they’re hardly the only income earners that will be affected by the 2012 Tax Relief law passed on New Years Day to avoid the so-called fiscal cliff.

For example, the estate tax, which kicks in after both a husband and wife pass away will now go up from 35% to 40% for higher income people. There was also an increase in the top ordinary tax rate from 35% to 39.6% for the people making the most money.

But everybody gets to experience the expiration of the payroll tax cut on employees FICA and Medicare withholding which jumped from 4.2% back up to 6.2%. This effectively means that most Americans will see a nearly 50% increase in the amount withheld from their checks for Social Security and Medicare. It’s a noticeable difference.

There were also increases in capital gains and dividends for high income earners such as married couples filing jointly and earning over $70,000 annually and 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.

The bottom line is that the higher income earners are really taking it on the chin but every income earner will notice they are paying more in taxes this year.

This realization has prompted many Americans to pay closer attention to what is happening to their taxes and to what they should be doing 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. This is where some are choosing to use Maximum Funded Tax Advantaged (MFTA) Insurance contracts that have been grandfathered into the IRS code for generations. Not only does the money grow tax-free, but also it transfers tax-free when you access it at retirement and when it goes to your heirs at the end of your life.

For those hearing about this option for the first time, it’s natural to have some questions.

Why Maximum Funded Insurance Contracts Make Sense

A common objection for people who are not familiar with MFTA is that they’re not aware of it performing well as a retirement savings vehicle. Fair enough, here’s a simple question: In the last 12 years, did you triple your money tax-free?

In other words, 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 attention.

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

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? Most of us would say sooner than later.

If what you always thought to be the best way to save for your future, for your retirement, and for your kids’ college, turned out not to be the best way, when would you want to know? When would you want to know the best way?

Conversely, what if what you thought wasn’t the best way to save for your future turned out to be the best way?

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.

That is where many people doubled and tripled their money during the worst decade since the Great Depression while most people in America barely broke even with their money in mutual funds. According to DALBAR, most mutual fund investors have only averaged 3.49% during the past 20 years. Worse still, whatever money they did accumulate was taxable.

If you’re serious about taking control and eliminating the dangers of taxes, you need to understand what even many professionals do not.

Start by visiting with a Missed Fortune advisor.

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

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