making the most of your retirement dollars presented by: jeffrey cutter, cpa, pfs cutter financial...
TRANSCRIPT
Making The Most of Your Retirement Dollars
Presented By:Jeffrey Cutter, CPA, PFS
Cutter Financial Group, LLC
Seeking A Tax-Free Retirement Educational WorkshopA Discussion of Retirement and Taxes
Questions to Think About
1. Do you think there will be higher taxes in the future? Do you want to wait until they change the tax law or do you want to do something before they change the tax law?
2. Do you think there will be lower benefits in the future? What is going to happen to your family’s standard of living? What is your strategy to replace those lost benefits?
3. If you have higher taxes and lower benefits, what happens to the money supply? The Government prints more! Another word is
inflation! What’s your strategy to address the hidden tax?
4. If we have higher taxes, lower benefits, and inflation, isn’t that going to cause more and more volatility? What if you make a mistake, how about five? How many -40% years can you take? What is your strategy to take advantage of the good volatility and not be hurt by the bad volatility? Do you have one?
Four Questions to Ask Yourself
Health Reform & Insurance
1. 50% of America according to the IRS makes less than 30K
2. 2/3 of America makes less than 50K
3. 80% of America makes less than 72K
4. Top 400 wealthiest people have more money than the bottom 50% of America. 400 out of 155 Million. Redistribution of wealth is taking place
5. Census.gov-Average cost of insurance policy in 2000 was $6K/year; 2010 was $13,800, projected to be $25K-$30K per year by 2020.
6. Census.gov-Average American income was $52,277 in 2000, in 2010 it was $49,800.
Challenges Facing Americans
Social Security & Medicare1.There are no economic assets in the Social Security trust
fund. - Office of Management and Budget
2.The fiscal gap is enormous and indicates that our nation is, quite literally, facing bankruptcy. – Laurence Kotikoff, economist
3.First COLA in 3 years; 1.7%
4.American Acutary’s say to immediately raise qualifying age
1.1925,Social Security created, life expectancy was 62, designed so no one received benefits
2.1965, Medicare created, life expectancy was 70, designed so benefits for only 4 years
3.Truthandaccounting.org to find out State financial condition
4.Usdebtclock.org
5.51% of the U.S. population does not pay taxes; where are we going to get the money?
Challenges Facing Americans
Challenges Facing Americans
Challenges Facing Americans
Facts About National Debt1
Facts About National Debt1
1. Spend Less2. Tax More
There are only two ways to combat the growing debt…
Are we spending less as a government?
We are spending more than we ever have in the
history of our country.
ARE WE GOING TO STOP SPENDING?
So the only solution seems to be…
Higher TAXES
History of Federal Individual IncomeTop Marginal Tax Rates
Source: truthandpolitics.org, referencing IRS Statistics of Income Bulletin Pub 1136
Types of Retirement IncomeTaxable
Earnings on:
• Stocks
• Mutual Funds
• Sale of Business Interests
• Real Estate
Income From:
• Wages & Interest
• Social Security
• IRA
• SEP
• SIMPLE
• 401(k)
• 403(b)
Capital Gains Ordinary
Retirement Income – Tax Free
• Municipal Bonds
• Roth IRA
• Life Insurance Cash Value*
*Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. Surrender charges may reduce the policy's cash value in early years.
Overfunding a permanent life insurance policy creates the risk that the policy will become what is known as a Modified Endowment Contract (MEC.) For MECs, contract loans and withdrawals are considered taxable income.
Smart Investment Order List
1. Free Money- Inherited - Matching 401(k) Money
2. Tax-Free Money
3. Taxed Deferred Money
4. Taxable Money
Smart Retirement Money Order
Smart Retirement Money Order
1. Free Money
2. Tax-Free Money
3. Taxed Deferred Money
4. Taxable Money
Any investment above the match of your 401(k) becomes tax-
deferred money, and skips over #2 completely.
Tax-Deferred
0 Tax on Deposits
Tax Deferre
d Growth
Tax-Free
After-Tax
Deposits
Example
Tax Deferre
d Growth
Taxed AsOrdinary Income On Withdrawal
$0 Federal Tax For QualifiedDistributions
Would you rather pay tax on this…
Traditional IRA
Tax-deferred
0 Tax on Deposits
Tax Deferre
d Growth
Roth IRA
Tax Free
After-Tax
Deposits
Example
Tax Deferre
d Growth
Taxed AsOrdinary Income On Withdrawal
$0 Federal Tax For QualifiedDistributions
Or this?
Traditional IRA
Tax-deferred
0 Tax on Deposits
Tax Deferre
d Growth
Roth IRA
Tax Free
After-Tax
Deposits
Example
Tax Deferre
d Growth
Taxed AsOrdinary Income On Withdrawal
$0 Federal Tax For QualifiedDistributions
So when you put money into an IRA or 401(k) are you
really saving tax?
No. You are simply delaying tax -
which actually compounds the tax problem.
Making it much worse!
How It Works with Universal Life Insurance
Premium$
- fees
UL Life Insurance Policy
$MinimumCompanyRequires
Maximum IRS Allows
Death Benefit
What’s Best for You?
Roth IRA?
What’s Best for You?
Universal Life Insurance?
What’s Best for You?
Both?
Next Steps