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Wealth Management


coinsYou may not realize that when you reach retirement, you may lose many of the deductions you once enjoyed, such as home mortgage interest, dependents, and retirement plan contributions. And if you’re a business owner, you’ll be losing even more deductions. Although you may have less income during retirement, your taxable income may be just as high or higher!

If you don’t take action to avoid paying excess tax, you’ll likely be in for a rather unwelcomed surprise during your retirement years, which could result in living a lower lifestyle or outliving your money.

No matter how you look at it, paying less in taxes means keeping more for yourself. In our opinion, as part of your tax-reducing retirement strategy, you should take a serious look at max funded, tax-advantaged insurance contracts as an option for developing a tax-free retirement.

*Life insurance policies are not investments and, accordingly, should not be purchased as an investment.


Along with their important death benefit, these contracts can be structured to hold your serious cash (by serious cash we mean money you have set aside for retirement). When structured correctly and funded properly, these contracts shelter you from the danger of increasing taxes.

Tax Savings #1 – Money put into these insurance contracts has already been taxed at today’s rates, not tomorrow’s. With tax rates likely going up in the future (to unknown amounts!), getting taxes over and done can be financially critical. Keep in mind, you’d always rather pay taxes on the seed money than the harvest money.

Tax Savings #2 – Money taken out of your contract—when done optimally, in accordance with Internal Revenue Code guidelines—is not regarded as taxable income, as opposed to income from a traditional IRA/401(k). You can also access your money tax-free using several methods. The smartest and best way to access your money from a max-funded, tax-advantaged insurance contract is via a loan, rather than a withdrawal.

Tax Savings #3 – With industry laws and regulations that have been in place for more than 100 years, the money that accumulates inside of a life insurance policy does so tax-favored. As a “life insurance policy” increases in value due to competitive interest being earned, no taxes are due on that gain, as long as the policy remains in force. Many financial vehicles, such as savings accounts, CDs, mutual funds, and money markets will typically have tax liability on their gain. See section 72(e) of the Internal Revenue Code.

Tax Savings #4 – Upon your death, the money in your insurance policy transfers to your heirs and beneficiaries completely income tax-free. See section 101(a) of the Internal Revenue Code.


As a hypothetical illustration, let’s say that you want $100,000 per year during retirement for travel, fun, and expenses, and you’re in a 33% tax bracket (between all of the taxes you pay).

The 401(k) Way: In order to net $100,000, you’ll need to pull $150,000 out of your 401(k). In other words, you’ll be sending $50,000 (or one-third of your money) in taxes to Uncle Sam!

The MFTA Way: In a properly structured max-funded, tax-advantaged insurance contract, a loan of $100,000 equals $100,000. Zero dollars go to taxes!

How much longer will your hard-earned money last if you don’t have to pay tax on that money? How much more peace of mind will you have if you don’t have to worry about your money running out due to increasing taxes eating away at your distributions? Based on the same net spendable income, empowering yourself with this strategy can be the difference between depleting your retirement nest egg in seven to 11 years, versus never outliving your money based—no matter how long you may live.


To be clear, the tax advantages of max-funded, tax-advantaged insurance contracts are no secret. They are, however, complex for the average financial advisor or financial professional to implement without years of research and training. Unfortunately, many advisors or accountants who “haven’t done their research” can end up demonstrating a resistance to these contracts, based on uneducated or limited opinion versus fact, especially regarding the tax benefits and internal rate of return that can be achieved.

Also to clarify, these are not tax loopholes. Max-funded, tax-advantaged insurance contracts have been used by the wealthy, both personally and in business, to protect and perpetuate wealth for decades. Many affluent and successful people have utilized these strategies to attain a tax-free retirement. The IRS has fully defined these benefits within Internal Revenue Code sections 7702, 72(e), and 101(a).


Over the last four decades, we have helped many highly successful people accumulate their money safely, earning predictable, tax-free rates of return averaging 7–10%. What that means is, when they retire, every $1 million dollars they have accumulated can generate $70,000 – $100,000 per year of tax-free income (aka tax-free retirement), without depleting the principal on their nest egg!