Insurance

If you are concerned that an unexpected, catastrophic event could impede your ability to earn or erode your savings, there is no question life, disability and long-term care insurance strategies may be appropriate solutions for you. The question is, how can you most efficiently acquire them? Did you know that life insurance can be implemented with pre-tax dollars inside a qualified retirement plan? Such a strategy can function as a self-completion mechanism, providing your heirs with your full retirement benefits even if you unexpectedly passed away. And, by a utilizing whole, universal or variable life insurance policy, you not only have another growing asset inside your pension plan, you have permanent coverage that lasts a lifetime.

Life insurance can also be purchased on a tax-advantaged basis through group benefit plans under Internal Revenue Code Section 79. Such plans provide a partial deduction on contributions, tax-deferred growth and tax-free distributions. In addition, many investment products, such as variable annuities, offer death benefit riders for your heirs, while providing an investment arena that offers tax-deferred growth.

When it comes to disability and long-term care insurance, their premiums can be fully deducted when your business is structured as a C-Corporation. And, that can mean big savings. Check out this example.

If your disability insurance premium was $5,000, it could cost you up to $8,333 in after-tax income in a 35% Federal tax, 5% State tax scenario. That's a $3,333 difference in one year, and across a 25 year career, it's the difference between more than $83,000 in taxes or $193,835 in pre-tax savings compounded at 6% over the same time period!

*This is a hypothetical illustration. Your results will vary.