If you’re like most investors, you’ve had a lot of people try to sell you on the idea of life insurance, haven’t you? So much so that you probably think you’ve heard everything there is to hear on the subject.
But have you heard …
How to use cash-value life insurance to build wealth the IRS can’t touch?
I know, I know. The term “cash-value life insurance” probably makes you want to crawl into a hole. But before you do that, check out what I’m about to say. (You can always crawl into a hole after, though by then I don’t think you’ll want to.)
For now, stop me when this sounds familiar. You have goals. Things you want to accomplish with your money—like travel, retirement, or helping out your kids. But to do those things, your money needs to grow. That’s hard enough when you don’t know what the markets will do. It’s even harder when you factor in taxes, which are already outrageously high and only likely to get higher.
This is where cash-value life insurance comes in.
You see, you don’t have to buy this type of insurance policy because you want the “life insurance” part. You already have it, and you don’t need more, right? No, the whole point of this type of policy is because of the favorable taxation that comes along with it. To put it simply, cash-value life insurance can act as an IRS-free warehouse. That means:
Once you put money into it, as long as you follow certain guidelines, that money will never be taxed again.
You read that right. You can deposit whatever you want, within certain limits defined by the IRS, without tax. It can be withdrawn without tax. In fact, even when you pass away, any money left over will go to your family without tax.
“Without tax.” Aren’t those nice words to hear?
Unfortunately, most people don’t think of cash-value life insurance this way. Instead, they put their money into an IRA or leave it in a 401(k) … two places that are very much subject to tax. (They’re also limited in terms of the amount of money you can contribute, while this type of policy is mostly not.) For example, say you’ve put $1 million into your IRA over the years. That sounds like a lot of money—until you remember that you fall into a 40% tax bracket. Suddenly, your IRA is worth only $600,000.
And if taxes go up? Well, you don’t need me to answer that question.
But with a cash-value life insurance policy, that same $1 million stays $1 million … because the IRS can’t touch it.
Here’s how the policy works in a nutshell:
• Whatever amount you deposit will always be tax-free. In the meantime, the cash value of the policy can grow tax-deferred (just like with an IRA).
• When you retire, the policy can provide cash flow for your retirement … again, tax-free.
• If you need to withdraw money from the policy before age 59½, you can do so … you guessed it, tax-free. (You can’t do this with your IRA or 401(k) in most cases without facing some kind of penalty.)
• There’s no Required Minimum Distribution you have to take out once you reach age 70½ like there is with a standard IRA (meaning you can leave the money in the policy as long as you want without penalty).
• When you pass away, any money left over in the policy will go to your family … and it will still be tax-free.
This isn’t some new, untested way to use life insurance. It’s a proven strategy baked right into the IRS tax code for the past 100 years. The only reason you haven’t heard of it before is because most people just don’t think of life insurance this way.
What am I asking you to do? Absolutely nothing.
So, if you want to build wealth without being subject to absurdly high taxes, consider a cash-value life insurance policy.
If you decide you'd like more info, consider Del-Sette Capital Management a resource.