The Power of Zero: How to Get to the 0% Tax Bracket and Transform Your Retirement by David McKnight

Author:David McKnight
Language: eng
Format: mobi
ISBN: 9780989000192
Publisher: Acanthus Publishing
Published: 2014-01-28T14:00:00+00:00

The Economics of an ATM Machine

The best way to understand a properly structured LIRP contract is to consider an ATM machine. Whether you withdraw $20 or $200 from the ATM, your fee will always be roughly $2.50. If the fee never increases, then the very best value is to withdraw as much cash as the ATM machine allows. In a way, the same can be said of a LIRP. Whether you contribute the minimum required to keep the policy in force or the maximum allowed under IRS guidelines, your expenses won’t change. To achieve fees as low as 1.5% over time, the death benefit must be reduced as low as possible while at the same time maximizing contributions.

The expenses you do pay, as I mentioned, go toward the cost of life insurance. So you are paying fees, but you’re getting something valuable in return: A tax-free life insurance death benefit when you die or a long-term care benefit during your lifetime. The moral of the story is this: Whatever road you take with your retirement accounts, someone’s going to be making roughly 1.5%. The question is, what are you getting in exchange for that 1.5%?

To focus solely upon the fees inside the LIRP, however, is to miss the broader picture. The real question that every potential LIRP owner should ask himself is, “Do the benefits of owning a LIRP outweigh the costs inherent to the investment?” Once again, a qualified tax-free retirement specialist can help you quantify the exact benefits of implementing a LIRP. If the math demonstrates that the LIRP can push you further ahead than where you would otherwise be, then it could be a welcome compliment to your other tax-free streams of income in retirement.

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