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Tax-Free Retirement Options

"It's not how much you make, but how much you get to keep!" says Ed Slott. 

"But there's good reason to pursue as much tax-free income as possible. 
At a time of life when interest rates are low and health-care expenses are high,
it makes sense to preserve every retirement dollar you can."

Insurance  for Income

The best tax-free retirement plan of the 21st century is a Max-funded indexed universal life insurance policy. It provides life insurance, flexible premiums, market-like returns, with no downside risk, and tax-free income as well as income tax-free of any residual capital left over at death. By simply using the same retirement money you have previously put into the tax traps like 401(k)s, 403 B’s, SEP plans and others, you can increase your retirement income "tax-free" so it does not effect your taxable income for Social Security tax calculations, plus offer "living insurance" if you live too long.

With the collapse of traditional pensions, insurers have seen increased interest in annuities, which produce guaranteed monthly payouts for life in exchange for a lump sum.

When funded by a Roth IRA, one type of annuity—an immediate fixed annuity—gives its owner an income stream that's guaranteed for life and also TAX-FREE.
Even those annuities funded by taxable savings can yield low-tax income because each monthly payment contains a small slice of your premium, which has already been taxed.

Roth IRA

The retirees' primary source for tax-free income is the Roth IRA. You put after-tax dollars in, they grow tax-free, and you pay no tax on withdrawals. Roths have an advantage over municipal bonds, the time-honored tax-free instrument because, unlike with Munis, Roth disbursements aren't counted as income for early recipients of Social Security, whose payments are docked if they make as little as $15,000.

Roth income is so advantageous that it makes sense to move funds as soon as possible from other savings such as 401(k)s and traditional IRAs and pay any taxes owed with the conversion.

Many retirees wait to convert until their first year of retirement, when they have no more employment income, leaving them in a lower tax bracket, but the conversion can be made anytime it's reasonable. The key is to avoid incurring higher taxes now as well as avoiding them later. The question you need to ask yourself is, do you have any room in your current tax bracket to make the Roth conversion now?

By converting earlier, people who are tax-averse also rid themselves of the mandatory—and taxable—withdrawals from IRAs and 401(k)s that come at age 70-and-a-half. (RMD’s)

A Retiree who has $1 Million in taxable IRA funds is looking at a required minimum distribution of more than $40,000 annually. Add pension and Social Security, and they should begin premature distributions to convert to a Roth systematically over time to stay in the same tax bracket.

If you would like to find out how to increase your tax-free income, contact us for a free consultation today!.

Koch Insurance Brokers, LLC
            336 Anvil Dr. | Douglassville, PA 19518 | Ph. 610.370.7268


This firm only conducts business in states where it is properly registered or is excluded from registration requirements. The firm is not engaged in the practice of law or accounting. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice.

Information presented is believed to be current. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. All investments have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio.