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Is it Time to Re-evaluate Your Retirement Plan?

8/9/2017

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​In 1978, when the highest marginal tax rate in the United States was 70%, and companies were eliminating corporate pensions, putting greater responsibility on workers to be responsible for their own retirement, the IRS instituted 401(k) retirement plans. These plans allowed a worker to contribute a portion of his/her income from each paycheck to an account (usually in the stock market) before taxes were taken out. The money could grow tax deferred until retirement (after age 59 ½), and income tax would be paid on the amount withdrawn. Initially, most companies would match all or at least a portion of the employee’s contribution.
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The reality has been far from the expectation. First, even with the modest inflation rate of 3% we have experienced over the past 30 years, prices will have quadrupled during your working years. A commodity costing $10 at age 25 will cost around $40 at age 65. This means it would cost four times the amount to retain the same life style at retirement as it did in your twenties. Second, the tax rate has come down and instead of paying less taxes at retirement, most people will be paying higher taxes. Instead of paying the taxes on the smaller amount of the money invested, they are paying taxes on the original contribution plus the growth. 
Would you rather pay taxes on the seeds (investment), or the harvest (investment plus growth)?
The following tables compares a tax deferred retirement account (401(k) (or IRA, 403(b), or 457 plan) to The RAFT Strategy (The Retirement Account Free of Taxes). This investment is made with after-tax dollars, grows tax deferred and at retirement may be taken out tax-free. It also does not have a penalty for withdrawing funds prior to age 59 ½ , and it does not require funds to be withdrawn beginning at 70 ½ . This investment is through the use of a type of life insurance product called Indexed Universal Life.
Comparison of Tax Deferred Plans vs Retirement Account Free of Taxes (RAFT)

The following examples are based on the following criteria: A male non-tobacco user aged 30 in good health, planning on retirement at age 65, and living to current predicted actuarial age of 85. Your specific situation will differ based on your current age, age at retirement, and time of death, but your results will be similar. 
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Regardless of your age or what stage you are in your working career, I can help you start a tax-free retirement plan. If you have not already started a tax-deferred plan, it is not too late. A tax -free retirement can be integrated with your current plan.

For a free consultation and to learn more about tax free retirement options, please contact me at 909-714-1830 or at russ@russmorrisfinancial.com.
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    Russ Morris, LUTCF

    In 1995, I became a licensed financial advisor and Life Underwriter Training Council Fellow (LUTCF) because I believe that next to our physical health, our financial health is the most important factor in our lives. For over twenty years, my goal has been to be a "financial doctor" that my clients can trust.  

    As a financial doctor, I take the time to listen, assess and understand each of my clients’ unique situations, goals, and concerns. I help grow assets for retirement and protect families from the financial loss that can occur after a premature death.  I truly enjoy helping my clients develop financially healthy lives.


    ​Along with my passion for helping all clients achieve strong financial health, I enjoy tennis, hanging out at Rancho Cucamonga's Bad Ass Coffee and meeting new people.

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