And sometimes we overlook some things that, will happen as we get older, as we decide to hang up our careers and walk away. the same goes for our clients who are preparing, building their nest egg, one of the things that is often overlooked are taxes.

During retirement. So today is going to be a very straightforward training because we're going to show you how to help your clients with pre-funding retirement taxes. Like many of us, I am with my employment here at URL for over 21 years, I contribute to my 401k and that reduces my taxable income for the years.

And that's a lot of, the, that goes to be, that's a lot to be said for a lot of the qualified retirement plans. They help reduce the taxable income today. But it puts that, tax burden on my back tomorrow when I am retired, and have to start taking those RMDs, one of the largest expenses a retiree has.

Is taxes. And that's because they've been putting their money aside in 4 0 1 Ks and IRAs, and different mutual funds where it's a qualified retirement plan. they're not paying any taxes. It's pre-taxed money. Now, when they get into that distribution phase and they've retired and they are getting that income, that money is being taxed at its normal ordinary income.

One of the best assets that any consumer. Can purchase is life insurance. Life insurance is a perfect option to help pre-fund future taxes during the working years. So as they're socking money aside for their retirement, they're also socking some money aside into a life insurance policy. We'll dive deeper into that and how that works.

During a person's working years, they're building their nest egg. Life insurance is the perfect asset to protect families. It helps fund emergencies. It provides a tax free cash reserve. We're going to show you how it pre-fund retirement taxes. And it also can efficiently help pass the estate, your, your client's estate to the next generation.

So you have that client that's working, they're putting food on the table, they have little mouths to feed. They have, they're, they're helping not only. Get ready for retirement, but also helping the next generation or multiple generations.

They may be helping their parents. their children, maybe even their grandchildren. People are relying on their income and what they bring to the family, protecting those assets with whether it's land or homes, businesses, life insurance is a perfect protection tool. There are three types of assets, and we're gonna spend a couple of minutes here on this particular slide.

There are three types of assets that a person can purchase or have, and we wanted to look into how they're taxed. The three types of assets are capital assets, retirement income assets, and tax advantaged assets. So let's take a look at capital assets. Those capital assets are things like stocks and bonds.

It includes real estate, property, and businesses. Those are capital assets. They purchase that stock, that real estate, that business, that property, something that's going to grow. It's not tax deductible.

So when they purchase those stocks or bonds, they're not deducting the taxes or, or having that go against their income for today. But it does grow tax deferred. When they decide to cash out that asset, sell it, whatever, there is no tax free reserve. And what they're subject to are capital gains taxes. So capital assets are stocks, bonds, real estate property.

It's not a tax deductible contribution when that particular asset is purchased. It does grow tax deferred up and down. with the stock market, the property value grows, business value grows, and there is no tax free reserve, but there is a capital gains tax rate that they'll have to pay. Now let's look at the other asset type, which is retirement income assets.

Those are your qualified plans like your IRAs and annuities, where the money that's being contributed in purchasing those particular assets It comes off the top of their taxable income. So if the person's making a hundred thousand dollars a year and they put $10,000 in, they purchase $10,000.

Or they have, IRAs that they're contributing towards, or annuities that they're contributing towards, let's say for $10,000, their taxable income is $90,000. these particular assets, IRAs, qualified plans, annuities, grow tax deferred. There isn't a tax free reserve.

And those assets, when they are, when they're liquidated, so to speak, when they're, when they start getting those distributions, those that those monies are going to be taxed as ordinary income. Now let's take a look at some tax advantaged assets like life insurance, municipal bonds, and Roth IRAs.

They can't that that particular client, you and I cannot take that as a tax deductible contribution. These are things that are being purchased that we're contributing towards with after tax money. The Roth IRA, the life insurance cash values grow it's tax deferred so that as that grows, they're not having to pay any taxes on the growth.

It also has a tax free reserve. Some of these tax advantage assets can help offset the other, taxes, capital gains taxes, and other income taxes during retirement. Let's see how that works. So when you're purchasing a life insurance policy or when the client is purchasing a life insurance policy, they're funding it, the life insurance for the death benefit, but there's also going to be cash value growth.

you have to structure it using a. Cash value life insurance policy, whether it's an index, universal life plan or a whole life plan, participating or not, there has to be a cash value reserve. That cash value reserve, grows tax deferred. All that money going into that is after tax money.

The death benefit is being purchased, the cost of insurance is being used with after tax money. So you look at that young family, that 30, 40-year-old, working every day. putting food on the table, providing shelter. All of those things should death happen before they retire.

Their heirs. The spouse, children will receive the death benefit, income tax free and qualified plan assets. if the person. Should die before retirement. the death benefit will be passed on to the next generation, avoids probate and it avoids income taxes. The third part is during retirement.

The client's gonna be taking a distribution from their retirement plans, whether it's from their 401k, their IRA stocks bonds. Maybe they're liquidating their business and some other assets. They're taking a distribution from the retirement plan and they're taking. What they'll do then, or what you'll wanna set them up at or with, is when you're, they're doing this, they're going to use the cash value of the life insurance policy that has grown tax deferred over the years that will equal the policies taxes, so that they do not have to take less of a distribution.

They're using the cash value as an asset to pay and prepay the. Taxes during retirement, so it doesn't have to be a large, financial burden during retirement years when they're on a fixed income. for somebody already in retirement, it's kind of too late.

For somebody in their thirties and forties, it's not too late. So here we're gonna take a look at this case study where we're gonna just look at a 30 5-year-old male. He's healthy, he's making $110,000 a year at his job. He's married, has three kids running around and he's contributing about 5% 'cause there's a 5% match with the company.

he is contributing 5% to his 401k. his life insurance annual premium is about $5,000 a year. He's gonna take $5,000 a year, put it into a life insurance policy I'm using Emeritus 'cause Emeritus not only provides a good death benefit protection, it also provides nice cash growth on their index, universal Life chassis.

it includes living benefits for things like terminal illnesses, chronic illnesses and critical illnesses. The cash that's growing in that policy is gonna be growing tax deferred, so they're putting $5,000 a year away that's going to get 'em a $325,000 death benefit. But we're doing this more for cash heavy growth.

So there's a death benefit there to help replace that income. Transfer some wealth, things of that nature. But we're doing this more to offset taxes during retirement he is contributing $5,000 a year for the next 30 years, figuring that we're gonna retire at age 65, paying into this policy for 30 years at $5,000.

we're looking here paying, he's put. 5% of his income, and this is assuming he's never received another raise. Just to keep math easy. we're looking at a 401k value of 1.8 million in 30 years. That's based on averages of about seven to 8% growth in their 401k. Now, during the retirement years, houses paid off, kids are out of the house.

They're now able to live the life that they wanted to live and have some financial independence. They got $1.8 million. They're gonna take $50,000 a year from their 401k annually. assuming they're at a 30% tax rate, they're going to pay $15,000 a year in income taxes off of that $50,000 income.

taking a look at the cash value at age 65, age 66, with Emeritas, we're looking at a cash value of $342,000. do they have to dip into their savings? Do they have to take out additional money out of their 401k or some other assets to pay Uncle Sam that 15 grand that's owed?

Absolutely not. They can take three. They have $342,000 of cash value reserves that they can access to now. Take that money, take $15,000 out tax free. It's a tax free loan from their cash value and pays off Uncle Sam. They've now offset that financial burden. Now there's some additional tax benefits to using life insurance,

So, And of course, ask questions. I love questions at the end here, but there are some additional tax benefits using life insurance. First, it can prepay a beneficiary's taxes So keep in mind that if the client has children that are grown, maybe they have a business, maybe they're in agriculture, they own a farm, they're land rich, cash poor, they would be able to use that death benefit to pay off Uncle Sam so that they don't have to liquidate assets to meet those financial obligations. It also can leave a tax efficient legacy. Assurance benefits can pay estate taxes. a financial burden that would be left with the, heirs or the next generation

And these benefits can provide income to a family for many years to come Just to review it avoids probate avoids taxes, so there's a large chunk of money now they can put that money and invest it and start drawing money on that, year after year, to fund their own retirement.

So there's multiple benefits, multiple tax benefits to using life insurance. here are a couple of final thoughts. I said at the beginning It's about having conversations with people. For some of you who are on the call today, you work in the financial planning sector of this industry.

Life insurance and financial planning complement each other for those financial planners watching today. Don't look at life insurance as a comp A competitor. We wanna work alongside you. You don't have to be a life insurance expert. You're working hard to help grow their assets, keep an eye on their retirement accounts, helping to, give them the best return that they can get as they're growing that nest egg.

The life insurance is a component that compliments that, and it's to help with future taxes. The other thing that. Everybody on this call needs to understand you do not have to be a tax expert. Understand it's just round numbers, assuming that we're probably around a 30% tax bracket.

if you have anybody in accounting, by all means, give them a call. They'll be able to help you as well. understand that your relationship with us here at URL, we also have experts that eat. Breathe and sleep tax law, life insurance, and other things, you don't have to be an expert.

You can lean on URL for that. We're here to help you with your case support, your case design. Lean on us, lean on the expertise that URL provides. So again, life insurance is a great tool to help prepay. For a person's retirement so they can offset their financial obligations to get rid of that financial burden, during their retirement years when they're on that fixed income.

Help your clients offset those financial burdens, and life insurance can help do that. Help pass that money, help protect the next generation as well. If you have any questions, please feel free to ask I appreciate everybody's time today. Like I said, very simple, very straightforward.

This is our Life Markets Masterclass. I'm Matt Alina. I'm the Life Markets manager here at URL. If you need to get ahold of me, you can call me directly at (717) 216-8041. my email address is Matt a at url INS group.com. Thank you everybody for your partnership. Thank you for your time today and we're here to help you.

Give us a call. We look forward to helping you with any of your life insurance cases. Until next time, take it easy everybody. Enjoy the rest of your summer and we'll talk soon. Bye for now.