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MINIMIZE Taxes, MAXIMIZE Income

Have you ever wondered if it’s possible to limit withdrawals from your investment accounts and stay in the lowest tax bracket possible while still reaching a specific retirement income goal?  Well it is…. and this quick video shows you how!

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I DON’T LOSE WHEN THE MARKET IS BAD? Tell me more….

Untitled-10I wonder how many people truly understand an Indexing Strategy in  an insurance based environment?

We’ve all been educated about Indexing Strategies in mutual funds, ETF’s and so on. But as a rule,   people have very little knowledge when it comes   to insurance indexing strategies—yet they do exist.  What’s more, the money in these assets grows tax free—like a 401 (k) – and can be accessed through policy loans, thus avoiding income taxes and allowing constant liquidity throughout the life of the assets.

So what exactly is an Indexing Strategy in an insurance based environment?  This kind of strategy has two key components:  a CAP or limit as to how much you can earn when the market is good and a protective floor of ZERO when the market is not good.  How is this different to the S&P Index?  The S&P Index spreads the investments evenly between 500 different stock companies. There’s no cap, so it lets you keep all the gains when the market is good, but  when the market is bad, you suffer the loss.

Now look at the chart below. This illustrates how a total of $100,000 would have performed  during the period 1998-2015 based on these two strategies. The top line of the graph represents the Insurance Indexing Strategy: you can see that in the years where the market loses money, you’re protected from losses due to the floor which protects principle.  The same doesn’t apply if you’re invested in the market—where you’re subject to the lows as well as the highs of the S&P 500 Index.  You can see that over time your assets in the Indexed Strategy are protected from loss  and have the potential for substantial growth. Over the 17 year period 1998-2015, the total yield of the Indexing Strategy was 114.9% with an effective yield of 6.75% compared to the total yield of the S&P 500 Index which ended at 83% (effective yield 4.88%).

As a point of note a Nominal yield is what one makes on an annual basis (Bank paying 1 % annually on a CD is a nominal yield).  An  Effective yield:  what one earns over a period of time greater than one year (for example, earnings of 5% in Year 1, 7%  in Year 2 and 12% in Year 3 gives an effective yield of 24% over 3 years).Updated Annuity Graph - May 2016

Over the 17 year period 1998-2015, the effective yield of the Indexing Strategy was 6.75%  while the effective yield of the S&P 500 Index was 4.88%

For more information on how an Indexing Strategy works and how you can incorporate into your portfolio, call Barry Goldwater at 617-527-9736 or email at barry@goldwaterfinancial.com

DISCLAIMER:  This graph is based on actual credited rates shown on the Index-5 product which is no longer available for sale.  Past performance is no guarantee of future performance and  should not be relied upon as such.
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TAXES IN RETIREMENT – Will You Be Paying MORE – or LESS?

Untitled-24Are you truly aware of how you can pay your future taxes at a discount?  Are you ACTIVELY working with your advisers—be they CPAs or attorneys—to implement strategies that will ensure you do not pay unnecessary taxes or leave you vulnerable to unprotected risk?

Here are a few questions you should be asking:Picture1

  • Have you created a TAX FREE ZONE for savings and income?  (Note that your 401(k) or pension is NOT a tax free zone).
  • Do you know HOW MUCH INCOME you will need in retirement?
  • Do you know what your SOURCES OF INCOME will be in retirement?
  • Do you know what the TAX ON YOUR INCOME will be in retirement?
  • Will you be in a LOWER TAX BRACKET in retirement?
  • Are you in a position to pay future taxes at a discount and protect your assets in case of a severe health event?

If you answered NO to one or more of these then now is the time to take a look at your portfolio to analyze whether your retirement savings and retirement assets are fully protected from taxes.

There are three ways that you can effectively create lower taxes on income in retirement:  you will either have to lower your income, create tax losses to offset your income, or create a tax free zone where all income is usually received tax free (I say usually because it is imperative that you follow the uncomplicated rules).  In the tax free zone, wealth transfer is usually tax free and health protection benefits are received tax free. The illustration below shows these options.

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A TAX FREE ZONE is the most under-utilized position in most peoples’ portfolios. Contact Goldwater Financial Group TODAY at 617-527-9736 to determine how a tax free zone can be added to your existing portfolio.

*Disclaimer:  rules must be followed for these strategies to work effectively

 

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As Markets Go Down, Look Into Index Annuities

 

As the stock markets are looking dismal, maybe its time to re-investigate index annuities to protect your wealth.

We hear more and more about indexed annuities in an insurance based environment and their increasing popularity when it comes to retirement planning, Yet naysayers are quick to decry them with arguments such as “what does minimum guarantee really mean?”, “too complex”, “limited  earnings because of the CAP”. But when the stock markets look dismal, those that have taken advantage of these annuities are protected.

Check out our JUNE article and the above video to understand why.

 

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Deferring Retirement Income with a QLAC

 

To find out more about deferring retirement income with a QLAC check out our QLAC Bulletin HERE or contact us at (617) 527-9736.

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Why Annuities are Gaining in Popularity

JigsawWe’re hearing more and more about indexed annuities in an insurance based environment and their increasing popularity when it comes to retirement planning, Yet naysayers are quick to decry them with arguments such as “what does minimum guarantee really mean?”, “too complex”, “limited earnings because of the CAP” and—my particular favorite—”beware of agent bonuses”.

But when it comes down to it, it’s difficult to argue with hard numbers and proven results.

So what exactly is an Indexing Strategy in an insurance based environment? This kind of strategy has two key components: a CAP or limit as to how much you can earn when the market is good and a protective floor of ZERO when the market is not good. How is this different to the S&P Index?  The S&P Index spreads the investments evenly between 500 different stock companies. There’s no cap, so it lets you keep all the gains when the market is good, but when the market is bad, you suffer the loss.

Now look at the chart below: this graph is based on ACTUAL CREDITED RATES for the period shown on a particular product* over the period 1998-2014.  It shows how $100,000 would have performed during this period had it been invested in the S&P (with dividends) and the actual credited rates of the Indexed Strategy.

With the Insurance Indexing Strategy, you can see that in the years when the market loses money, you’re protected from losses due to fixed zero floor.  The same doesn’t apply if you’re invested in the market.

 When it comes down to it, it’s difficult to argue with the numbers:

IS Graph 300 dpi

*This graph is based on actual credited rates for the period shown on the Index-5 product from American Equity which has since been replaced
 **Past performance is no guarantee of future performance and should not be relied upon as such
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Healthcare Costs in Retirement

Infographic 7 - Medical Realities - low res

 Medical Realities & Your Financial Assets

As we all live longer lives, we are all at a higher risk for a serious illness than we think. These statistics tell a scary story and healthcare costs in retirement are becoming a major concern. Make sure your financial assets are protected against tomorrow’s medical realities…

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Do YOU Have a Boiler Plate Retirement Plan?

Picture13Whether we like to admit it or not, most of us do indeed have a boiler plate retirement plan.  We start work and immediately sign up for the 401(k) plan with the employer match. We assiduously contribute to the plan and our employers assiduously match our contribution. We don’t know the first thing about investing so we’re advised to put our contribution into the “higher risk” plan if we’re young, “average risk” plan if we’re in the middle of our careers, and “low risk” plan if we’re nearing retirement. That’s where the investment/retirement planning ends for many of us. Maybe we move the funds around now and then, maybe we don’t. By the time we hit 50 and check to see the “millions” that have supposedly accumulated in our plans, we’re disappointed to see that we’re nowhere near ready for retirement.

What’s more, what we have accumulated will be further reduced by the time we retire: we’ll need to pay taxes, the cost of living will be considerably higher and we have no idea what our medical costs may be. So what do we do?

Before panic sets in, there really is something that you can do. As the famous Stephen Covey famously said the first step is “begin with the end in mind”, then you seek out the adviser who can help you reach that end.

Beginning with the end in mind means you need to ask yourself some tough questions:

  1.  At what age do you want to retire?
  2. How much annual income (after taxes) do you need to retire comfortably? Remember you’ll need to adjust this for inflation!!
  3. What is the value of your current retirement plan and, based on historic growth, what will it be by the time you retire?
  4. How much of that plan will go to paying the taxes due on that income?
  5. Once all of this is taken into account, will you have enough to retire and if not, what’s your plan to get there?

Man on Ladder 2While these questions may seem initially overwhelming, with the right adviser, they needn’t be, but here’s a hint: the right adviser is most likely NOT your 401(k) adviser.  When looking for the right adviser, make sure you find someone who can not only estimate the future value of your current plan based on historic growth, but also account for inflation and taxes to give you a realistic picture of “the bottom line”. The right adviser should also give you options to minimize your tax bill as well as increase retirement income to offset inflation. You really do have more options available to you than you think. Click HERE to download GFG’s Wealth Management & Retirement Handbook to check out just a few of them….

Deferring IRA Income