Tax Free
Retirement Income

Money put into these insurance contracts has already been taxed at today’s rates, not tomorrow’s. With tax rates likely going up in the future (to unknown amounts!), getting taxes over and done can be financially critical. Keep in mind, you’d always rather pay taxes on the seed money than the harvest money.

Money taken out of your policy—when done optimally, in accordance with Internal Revenue Code guidelines—is not regarded as taxable income, as opposed to income from a traditional IRA/401(k). You can also access your money tax-free using several methods. The smartest and best way to access your money from an IUL LASER Fund is via a loan, rather than a withdrawal.

Money taken out of your contract—when done optimally, in accordance with Internal Revenue Code guidelines—is not regarded as taxable income, as opposed to income from a traditional IRA/401(k). You can also access your money tax-free using several methods. The smartest and best way to access your money from a max-funded, tax-advantaged insurance contract is via a loan, rather than a withdrawal.

Here’s why:

When done correctly, it is a loan made to yourself that is never due or payable in your lifetime. To be in compliance with IRS guidelines, an interest rate is typically charged, and then that interest is offset with interest that is credited on the money you didn’t “withdraw,” but rather remained there as collateral for your loan. This results in a zero net cost in many instances.

Loans taken from your contract ARE NOT TAXED, because they aren’t deemed earned, passive, or portfolio income—which are the only types of income that are subject to income tax on a 1040 tax return. See section “7702” of the Internal Revenue Code.

A maximum-funded tax-advantaged insurance strategy, when structured properly and loans taken correctly, will not hit your tax return. That is powerful.” – Jim Whitehead, CPA

With industry laws and regulations that have been in place for more than 100 years, the money that accumulates inside of a life insurance policy does so tax-favored. As a “life insurance policy” increases in value due to competitive interest being earned, no taxes are due on that gain, as long as the policy remains in force. Many financial vehicles, such as savings accounts, CDs, mutual funds, and money markets will typically have tax liability on their gain. See section 72(e) of the Internal Revenue Code.

• Policy loans and withdrawals will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult a tax professional.
  
  
• Policy loans are not usually subject to income tax, unless the policy is classified as a modified endowment contract (MEC) under IRC Section 7702A. However, withdrawals or partial surrenders from a non-MEC policy are subject to income tax to the extent that the amount distributed exceeds the owner’s cost basis in the policy.

Upon your death, the money in your insurance policy transfers to your heirs and beneficiaries completely income tax-free. See section 101(a) of the Internal Revenue Code.

• In summary, we have never seen any other money accumulation vehicle that accumulates money totally tax-favored, then later allows you to access your money totally tax-free. Then when you ultimately pass away, it blossoms (increases) in value and transfers to your heirs totally income-tax free.
• As a side note, we don’t recommend that every retirement dollar you set aside be in an IUL LASER Fund. While you will learn more during one of our educational events or personal consultations with an IUL Specialist, just know that significant amounts of taxes can be reduced by including this type of insurance policy in your retirement portfolio—or by making it your primary retirement planning strategy like thousands of other highly successful, wealthy people have done.

Many years ago, early in my career, I remember going to a tax seminar done by a national CPA firm. I asked the instructor about accumulation of wealth using maximum-funded, tax-advantaged insurance [policies] and he said, ‘This is one of the most powerful things that I’ve ever seen.’ I was a younger CPA then and was impressed with his response. I’ve worked with Doug over the years and am impressed with his concepts and who he is. The accumulation of wealth inside [an IUL LASER Fund] is very, very powerful.” -Marvin Paul Neumann, CPA