Retirement Planning – Another Great Option

In my last blog post, I discussed the many benefits of qualified retirement plans. As great as they are, however, sometimes these plans are not the proper economic fit. In one example, let’s talk about a doctor who is much younger than the staff. And perhaps there is an especially large staff. My rule of thumb is that if the doctor can keep 78% or more of the total contribution, then that is a favorable situation. But in the situation I am describing, the doctor may only be ale to keep 40 to 50% of every dollar contributed.

Another example might be a doctor earning enough money to contribute more than the 401(k) maximum. And a defined benefit plan coordinated with the 401(k) would allow him/her to do this. But again – with an unfavorable census – with some staff members as old or almost as old as the doctor- the costs to do this are prohibitive.

Welcome to the world of a properly designed whole life insurance policy that can serve as an amazing wealth accumulation vehicle. And if you own your business as most dentists do, there is no requirement for other employees to participate in the plan. So the entire dollar amount that you want to set aside for retirement goes only to you! There are numerous benefits to using whole life as a retirement strategy.

• There is guaranteed protection of your principal. The cash value accumulating in the plan is not subject to the fluctuations of the stock market.

• There is a guaranteed rate of return. Usually with a top line insurance company, that rate of return is in the area of 4 to 5%.

• The money in the plan accumulates tax-deferred. The concept is similar to a Roth IRA. When you put the money in, it is with after-tax dollars – so there is no sheltering effect as when you contribute to a qualified plan. But when you take the money out, it is tax-free!

• There are no age restrictions or limitations as to when you can withdraw the money. With pension plans, there may be penalties if you withdraw before age 59 1/2. Also, you must take required minimum distributions from your pension plan starting at age 70 1/2. Of course, those distributions are taxed at whatever the ordinary income tax rate is at the time of the withdrawal.

• You can also borrow from the cash value of the whole life policy – at any age and at any time – without having to pay a tax or a penalty. This is a big benefit compared to the many restrictions you would encounter if you borrow from a qualified plan.

• Of course, the death benefit of the whole life policy is guaranteed for the rest of your life. That death benefit is tax-free to your beneficiaries.

• With these newer well-designed whole life policies, there are also riders included for disability and long-term health care. These are almost too good to be true.

I would certainly encourage you to consult an expert on the many advantages of acquiring a whole life insurance policy. Randy Fine of Robert Fine & Associates is as good as it gets. Randy is extremely knowledgeable and creative with years of experience working with dentists and other high net worth individuals. He has helped many of my clients and I feel totally comfortable recommending him. You can reach Randy at 508-889-6329.