Please view my retirement blog posts Part 1, Part 2 and Part 3 of this 4 part series before viewing.
The final tax planning tool is life insurance. Life insurance is the only place you can put your money where it is safe, grows tax deferred, can be tapped in case of an emergency and then passes tax-free to your beneficiaries at your death. Life insurance offers you a way to leverage your estate because generally at your death it pays a multiple of the premiums you paid. The income is tax-free to your heirs. The life insurance policies available today span a wide range of choices that allow you to perfectly match your needs and affordability. Some policies offer linked benefits in that they provide cash in case of emergency or other needs, pay tax-free a multiple of the death benefit to cover long-term care expenses, pass to your heirs tax-free the death benefits when you pass, and even if all the benefits are used to cover long-term care will pay a residual benefit to assure that the final expenses for a dignified ending are covered. Life insurance is a great way to build an estate or to protect one that you’ll already built. Again, you’ll want to manage your income and estate taxes by working with a financial advisor to tailor life insurance coverage to fit your circumstances.
CONCLUSION
Concluded were four great ways (see previous blog posts) to beat the tax-man at his own game: fixed annuities, Roth IRA, timing your Social Security benefits and life insurance. You don’t have to be rich to take advantage of the benefits offered by these tax-deferred and tax-free retirement/estate planning tools. Unfortunately these options can be complicated and you’ll need the help of a professional financial advisor to steer you through the maze created by our taxing authorities. If you aren’t using these methods no doubt you’re paying more than your fair share of taxes. More taxes mean less to spend on your retirement and less to leave as your legacy. One of things our government has provided is an ample supply of loopholes in the tax laws, but they did not furnish an easy-to-use reference manual. Nonetheless, there are qualified financial advisors who specialize in retirement and tax planning that can lead you through the maze and save you loads of taxes which will make your retirement a better one or allow you to leave a bigger estate for your loved ones. But, you’ve got to get pro-active and make sure you’re not paying more than your fair share of taxes.
Shelby J. Smith, Ph.D.
March 2008
Related Resource: You, Taxes and Retirement (Video Seminar 10min)
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