We all know how important it is to put away money for retirement purposes. Well maybe not all of us, but it is time to start thinking about it. When mentoring young professionals are you also coaching them on different avenues of putting money away for their futures? And if you are, what kind of advice is it? Here is something that works for all ages, but it can be supercharged for those young professionals who are making too much money and not putting enough of it away.
This might shock you a bit.
Here is an example of a 10 Pay Whole Life Policy done for a 28 year old male in great health and financial standing.
$30,000 premium for 10 Years. Easy math will tell us the total premium paid into the policy is $300,000.
By the way this can be done both in smaller and larger amounts.
Now at age 38, the young gentleman lets the money ride and continues to grow his cash value without paying long term capital gains taxes.
By age 50, he has over $700,000 he can access, but refrains and lets the cash build up even higher. P.S. he has a death benefit of $1.8mm at this point.
At age 60 he finally decides it is time to retire and wants to use some of his cash value. He has just over $1,200,000 of cash value he can access. He wants to continue being responsible about his money and instead of taking the lump sum, he and his broker calculate he can take a tax-free income of about $65,000 per year. If you add in taxes this is equivalent to taking about $92,000 out of a qualified retirement account.
So how long will he be able to take that tax-free $65,000 out for? 25 years.
Yes, 25 years multiplied by $65,000 is equal to $1,625,000. This is a taxable equivalent of over $2,300,000.
How much did he put in again? $300,000. That sounds like a pretty good deal to me.
Oh and one last thing, even after he has taken all that money out, at age 86 he still has a death benefit to leave for his family of about $1,900,000 which will be paid out non-taxable to the beneficiaries.
Grandparents and Parents, remember that you can easily do this for your grandchildren or children.
Business owners, this may be the best pair of golden handcuffs currently on the market for your movers and shakers.