You may be familiar with Roth IRAs—in fact, you may have them in your retirement portfolio. If so, you’re not alone. Roth IRAs are chosen by millions of investors for their at-retirement tax benefits.
Instead of a traditional IRA, which is taxed upon distribution during retirement, a Roth IRA is taxed during the contribution phase, and distributions during the retirement years are tax-free. This is a great step in the right direction.
But Roth IRAs still have many limitations. And like we always say, following the crowd doesn’t necessarily mean you’re following the best path.
If you were a farmer, would you rather pay taxes on the seed or the harvest? By choosing to pay on the seed now and have it over and done with, you can eliminate your risk of paying tax on the harvest, when taxes will most likely be higher.
While Roth IRA tax treatments are great, they come with two significant downsides.
Often the money inside a ROTH is at risk in the stock market. Having your principal at risk is a mistake millions of Americans are making with their retirement nest eggs. A terrorist attack tomorrow could cause consumer confidence and fund values to plummet. Overnight your retirement dreams could become a nightmare, due to insufficient funds.
Government-sponsored investments, such as Roth IRAs, come with strings attached. For example, with a Roth IRA, you’re limited on the amount of money that you can set aside for your retirement years. As of 2022, $6,000 ($7,000 ages 50 or older) is the maximum amount you can save per year. Many who are laser-focused on saving for retirement or have higher net-worth are frustrated by this limitation.
Wouldn’t you rather enjoy safety of principal, and be able to put away as much money as you’d like toward your retirement? A properly structured maximum-funded, Indexed Universal Life policy, or what we call an IUL LASER Fund, doesn’t put your principal at risk in the stock market, although you can still benefit from market gains.
And because these policies are established with secure, time-tested insurance companies, rather than the government, they effectively cut the strings on maximum contribution limits. These policies can be structured to hold as much money as the policy is designed and approved for.
Disclaimer: Life insurance policies are not investments and, accordingly, should not be purchased as an investment.
We have helped many highly successful people accumulate their money safely, earning predictable, tax-free rates of return, with historical annual average rates of 5–10%. What that means is, when they retire, every $1 million dollars they have accumulated can generate $70,000 – $100,000 per year of tax-free income (aka tax free retirement), without depleting the principal on their nest egg!
