What Is Average Net Worth Of 70-Year-Old In United Statess Uncle Sam’s Snake Oil

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Uncle Sam’s Snake Oil

Uncle Sam and his band of merry men, better known as Congress, pushed snake oil on the unsuspecting public in the form of retirement plans. But wait, isn’t a pension plan one of the benefits we look at when shopping for an employer? Well, not all retirement planning is created equal and in most cases, quite disastrous.

Distributions from all qualified plans must begin no later than April 1 of the calendar year following the year the participant reaches age 70 1/2, or the calendar year in which the employee retires. Special rules apply if the distribution is made to a 5 percent owner of the business. The purpose of minimum distribution rules for retirement plans is to force the owner or participant of the pension plan to withdraw money from the plans, thus triggering an income tax on these monies. On April 16, 2002, the Internal Revenue Service issued final regulations as to these distributions.

In general, the idea according to the regulations is to have the owner or participant of the pension plan start taking the money from the pension plan from the later of when he finishes working or age 70.5. One purpose of this is to ensure that these monies will be subject to income tax before the owner’s death.

Based on the current system the government has created with pension plans, the average retired couple will pay eight to twelve times more in taxes on their IRAs and 401(k)s during their retirement years than they saved during their contribution and accumulation years. Generally, it is understood that you put money into your pension plan and it is tax deferred and this is a great thing. Unfortunately, you may well find yourself in a higher tax bracket if your pension accumulation is done correctly.

In addition to a higher tax on retirement, many people find themselves with a free and clear home; they no longer have mortgage interest deductions to offset income tax. Many Americans find that they now pay back everything they saved in taxes during their accumulation and contribution years within the first two years of distributions. Therefore, there is an insidious income tax waiting for most people and if they have not planned their estates, double taxation in the form of both income and estate tax.

Many delay the transfer of their qualified funds until age 59 ½ to avoid the 10% tax penalty. Sometimes by delaying paying taxes, retirees will find themselves in a higher tax bracket after age 59 ½ because Congress could raise tax rates due to policy change. Inevitably, the piper must be paid now or later.

What is the answer? Simple, investment grade life insurance. This type of life insurance is not the same as the one you get countless letters in the mail about. This is life insurance that focuses on building triple compounding because it is tax deferred. The difference between the delay that life insurance and pension plans experience is that when it comes time for payout, life insurance is received as a loan. This is a powerful concept because the income will not be taxed; loans are not a form of taxable income. However, as a loan you will have interest on the payments. Most people mistakenly think that they will pay interest on their own money with life insurance. While in theory this is true, the best insurers provide zero-wash loans, where the interest is essentially forgiven or taken away from the death benefit when a person transfers. We’re talking about real life insurance, not the typical life insurance that most people have because you use it while you’re alive.

The best candidates to create amazing wealth with investment life insurance are those in their thirties to fifties. Once committed and in the right product it is predictable that they will retire rich and without the annoying taxation that surrounds a pension plan. There are even strategies for starting a contribution plan to your investment that only requires repositioning your current funds. To view a presentation on ways to finance your retirement, go to [http://www.abundantmoney.com].

If you’re over fifty, I’m sorry we missed you. If you have children, don’t let another day go by without them starting a plan because 79 million people are going on Social Security in the next few years. Despite Social Security getting a 2.7 percent boost next year (2005), Medicare will eat up much of the increase and when the 79 million eligible Americans sign up – see below.

James Burns, Esq.

Law Office of James Burns

18662 MacArthur Blvd., second Floor

Irvine, CA. 92656

[email protected]

(949) 440-3243

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