Taxes could be the single largest thing to disrupt a retirement or an inheritance. That’s why tax-planning conversations continue to be a hot topic with clients and prospects alike.

Winston Stevenson, President and COO of Winston & Companies Retirement and Financial Services, talks about taxes — and potential tax burdens — with all his clients and prospects. He’s found that many people do not realize that all the money in their 401(k) is not theirs. Winston tells clients how saving in a 401(k) now may be setting them up for trouble later.

“The government has their hands in your pocketbook,” Winston says. “If you do not address this issue now, you may regret it later.”

Life insurance is one avenue Winston likes his clients to consider.

“Life insurance is one of the most unique assets around,” he says. “It offers tax-free solutions, and I don’t understand why more people do not see the value of what life insurance can do for a person.”

Winston considers life insurance the greatest solution ever created for the financial problems caused by the death of a loved one. His other point: Life insurance provides a potential solution to the only two “guarantees in life:” death and taxes.

“We have clients who had over $3 million in their IRA,” Winston says. “Their plan was to leave this asset to their daughter, who is a schoolteacher making $35,000 a year.”

Because of the Secure Act, non-spousal beneficiaries must withdraw all funds from an inherited IRA within 10 years of the original owner’s death.

“Those clients were leaving a huge tax liability behind for their daughter, and they didn’t even know it,” Winston says.

Winston explained to his clients how this tax problem is a compounding one by asking, “How is your daughter going to be able to pay that tax bill?”

He then answered his own question by acknowledging, “Your daughter will likely have to use those inherited funds to pay the tax bill. However, withdrawing funds from this IRA to pay the taxes will create a new tax bill, and then she will have to withdraw more money from this account — and the cycle will continue.”

Winston then told his clients that life insurance offers a potential solution:

“By taking some of the funds from the IRA to fund a life insurance contract now, while the clients are still alive, they can mitigate their daughter’s future tax burden — or perhaps even solve it.

You can help make sure taxes do not disrupt your clients’ and prospects’ retirement plans. These resources can help you tell this story:

• Tax Planning in Today’s Economic Environment Consumer Guide
• NEW! Tax Planning in Today’s Economic Environment Turnkey Marketing Kit
• Proposed Tax Changes Chart – Build Back Better Act
• Purchasing Life Insurance with Qualified Funds Consumer Guide
• IRA-to IUL Conversion Strategy Consumer Guide

Our AE Life brochures can be uniquely branded to your firm. Click here for more information.

LTC Awareness Month

November is Long-Term Care Awareness month. Make sure you are having this life-changing conversation with your clients and prospects. We have many resources to help you tell the long-term care story. Click here to access AE’s suite of LTC materials.

 

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