Traditional vs BOTAX Free Retirement Plan: Which Would You Choose?

Traditional Retirement Plan vs Business Owners’ Tax (”BOTAX’) Free Retirement Plan – Which Would You Choose?


Barry Goldwater – founder of the Goldwater Financial Group – is thrilled to be named Producer in the upcoming documentary short by DNA  Films called “Maximum Achievement: The Brian Tracy Story.”

Click below for more information!

Long Term Care: Self Insure – And Shift Your Risk

Man 1

As human beings, while endowed with powerful brains, we can often behave in irrational ways – not least when it comes to our health.

While there is ample evidence to correlate healthy eating and weight loss with improved health and extended life, many continue to practice some of the unhealthiest lifestyles,      believing nothing will adversely affect their health moving forward – until, of course, it’s too late.

The same applies to long term care.  Today, many people either refuse to think about the issue altogether, or they self-insure their risk by setting aside money for such eventualities. These are the most common reasons for their decision:

  • “I’m in good health and I feel good. Nothing will happen to me.”6436
  • “It’s a waste of money – I’ll never need this.”
  • “I could be investing the premium I would be paying and creating an income instead.”
  • “Why should I create surrender charges on money that is now liquid?”

But what if there was a solution out there that not only provided long term care insurance
but also REFUNDED the premiums if they were never used?

One such solution is Asset Based Long Term Care. When designed properly, Asset Based LTC seamlessly morphs into long term care insurance liquidity for medical services not covered properly by health  insurance contracts. If care is not needed in this lifetime, the premium  refund of all contributions comes back in the form of a TAX FREE death benefit to beneficiaries.

The beauty of this type solution is that it offers the flexibility of self-insurance, while transferring the risk on to an insurance company in the chance there is a long term care event.  The chart below shows how it works.

Asset Based LTC

In summary, for people who believe in self insuring their long term care risk, the investment value of the original premium is realized when the contributor needs care, not on an annual rate of return basis.

Since the return of the original premium comes back to the contributor without taxes – whether in life or death – it can be argued that the insured has entered into a form of self insurance for a future long term care event while transferring the risk of this occurrence to an insurance company.  Brilliant planning!!


An excellent article by Mark Cussen on frequently missed tax deductions, including disability insurance, health savings accounts, timing medical expenses, life insurance to name just a few.  Click HERE to read the article in its entirety!



Long Term Care Solutions


Today, many people refuse to think about long term care. But by doing so, they are effectively self-insuring their risk. Who should really pay for your LTC? You or the insurance company?  Here’s how it works…..

Infographic 6a - Hybrid Insurance


Man on Ladder 2A QLAC (\ˈkyü-lak\) or Qualified Longevity Annuity Contract, is a new product and concept just approved by the Treasury Department which allows people who do not need the income from their qualified retirement plan and who do not want to pay the tax on forced income, to defer $125,000 into a QLAC contract. Money in a QLAC escapes the required minimum distribution rules associated with qualified plans and thus, income can be deferred until a later date.

Why Would I Defer Income to a Later Date?

There could be several reasons you do not wish to take the standard required minimum distribution, including:

  1. You already have the income you need and therefore do not need additional income from your retirement account.
  2. Taking additional retirement income from your retirement account could potentially push you into a higher tax bracket.

If you have a diversified portfolio and you and your spouse have, for example, $1million combined in your 401ks and IRAs, you would be allowed to move out $250,000 combined from your portfolio. That means $250,000 escapes the required minimum distribution rules and is allowed to matriculate into the future.

Prior to this new offering, at age 71 this couple would have been required to take $9,434 from their combined $1million account based on the required minimum distribution formula; over 5 years, they would need to take $50,742 and pay $17,759 IN TAXES. In 10 years, they would have distributed $112,188 and paid $39,218 IN TAXES.   By switching this money to a QLAC, they are able to defer that payout, and the longer they defer the payout, the greater that payout becomes.

How Much Does This Annuity Pay When I Need Income?

Payout rates vary slightly from state to state, but let’s say the couple lives in Florida and decides to take payout at age 75. In the state of Florida, the payout rate at age 75 for a woman whose current age is 66 is $1,295 per month, a 12.4% payout rate. If she were to wait until age 80, her rate would be $1,846 per month, a 17.7% rate.

Other Uses of QLAC Income

The beauty of the QLAC is that its use is not restricted so the income from a QLAC can be used in different ways:

  • QLAC income can be used to pay premiums for existing life insurance and long term care insurance, thus alleviating premium burdens from cash flow as we get older.
  • By making a child an income beneficiary for part or all of the income, you can give your child their legacy gift annually while you are still alive.
  • Lastly, a charity can be the income beneficiary of QLAC income, thus becoming a deductible gift to your favorite charity and offsetting the taxes due on the income.Jigsaw

QLACs are the next big thing in retirement planning which will usher in a new wave of legislation and products inside of our 401(k)s and IRAs.  This is a start in alleviating early distribution rules from retirement plans. People are living longer and we need encouragement to create additional income sources to supplement this longevity. QLACs are a start.



Attack the Tax – Part Deux

Paying Retirement Taxes at Discount Prices

Man 1In Massachusetts, on some preset weekend that no one ever remembers, we forgive the sales tax up to $2,500 on most all purchases. Stores are packed, people buying everything in sight as if we’d got advance notice that Godzilla was coming. All to save 6.25%. That is $6.25 on a $100.00 purchase and $62.25 on a purchase of $1,000. Why are people out in throngs? Not because they save so much money, but because people hate paying taxes.

Fast forward to our retirement income. We will lose anywhere from 15%-39% of our income during retirement depending on our tax bracket. We accept this fate with a shrug of our shoulders. The reason Americans are so blasé about the tax we pay on retirement income is because we believe there is nothing we can do except to try and lower our tax bracket. But how do you expect to do that when you are requesting an annual income of $150,000 at retirement?

6194Attack the Tax planning methodology is the only kind of planning that presents an opportunity to pay taxes at a discount. How?   By using an Index Universal Life Insurance policy. Why life insurance?

  • Because of its tax free growth of cash values.
  • Because of tax-advantaged cash value withdrawal income.
  • Because of the guarantees in the policy, like never losing cash value because of negative stock market performance (although policy fees are deducted whether the market is up or down).
  • Because fees in insurance policies are almost always way below the taxes that we pay.

How does all of this work?  Let’s take Jane Doe as an example.

  • Age: 45
  • 401(k) annual contribution: $17,500 annually
  • Rate of Return: 6.5%
  • Inflation rate: 2.5%
  • Taxes saved over 30 yr period: $128,000

6741At age 66, Jane’s portfolio accumulates to $2.3 million. In order to ensure that her portfolio lasts her lifetime, her maximum annual withdrawal cannot be more than $139,000 in the first year, netting her $97,756 after taxes at 30%. Given her tax bracket, and assuming that (a) her portfolio continues to grow at an average  of 6.5% and (b) she lives to age 90, she will end up paying over $1 million in taxes during her retirement. The Attack the Tax planning methodology, however, at a total cost of $235,000 (or $11,750 annually) could save her more than $800,000 in taxes because she will be paying the tax from her alternative investment in life insurance.*

You do the math! Would you rather pay tax wholesale or retail?



(1) Index Universal Life (IUL) with a 10% cap annual point to point

(2) Illustrated values assume a 5% rate of return

(3) Premiums for IUL last 20 years

Charitable Gift Annuity – A Win-Win for All

In the world of non-profit fundraising, Charitable Gift Annuities fall into the scope of Planned Giving but are often regarded with skepticism because they require more in terms of education, planning, negotiation and counsel than most other gifts.

Yet Charitable Gift Annuities offer opportunities for discussion that yield benefits not only to the charity but also to the donor beyond a one-time tax deduction.

So what is a Charitable Gift Annuity?  Simply put, it is a donation to a charity that not only offers a tax deduction for the donor, but also creates an income stream which can in turn be assigned to any individual or entity designated by the donor.

4018A conversation about a Charitable Gift Annuity can occur from many angles but possibly the most attractive angle is when it can be coupled with a discussion regarding Roth IRA re-characterizing. What does a Roth IRA have to do with a Charitable Gift Annuity?

Quite simply it shows a donor how they can:

  • Give a significant donation to their favorite charity;
  • Get a tax deduction on that donation;
  • Use that deduction to create tax free income from a ROTH type of investment;
  • Leave heirs more of a legacy;

Here’s just one example of how John & Jane Doe used a Charitable Gift Annuity to benefit both their favorite charity and the re-characterization of their own assets:

Chart 2

These are the conversations that clients are interested in having. The charitable gift annuity is a clear and fairly simple concept and since the 2008-2009 meltdown, older clients in particular are looking for guarantees and solutions that take their retirement income out of harm’s way and offer more risk averse options. This gift annuity strategy is suitable for those who have charitable intentions and who want to create income from the gift while still alive. This is clearly the kind of solution planning donors will appreciate hearing about because it expands a charity’s ability to offer concierge type services to their donors and trustees.

4 Dirty Secrets I Will (Never?) Tell You


I recently read an article advising me of all the terrible secrets that I – as an insurance broker – am supposedly withholding from my current – and potential – clients. As a career broker with an unblemished record, I was interested to learn what these skeletons in my closet are…I was disappointed.

Ultimately, I questioned why a financial planner felt it necessary to write an article attacking the sales distribution methods of life insurance. Surely that smelled suspiciously of “when the debate is lost, slander becomes the tool of the loser” (all credit to Socrates for that one!) But let’s get back to my dirty secrets….

#1   “Beware the Insurance Agent who gets paid 100% on Commission!”

Quite why one should beware was never really made clear but the article implied that the broker/client relationship was a win/lose scenario, with only the broker winning. Isn’t that a little bit like saying you shouldn’t drink Coke because the CEO of Coca-Cola makes money whenever you make a purchase?

It is the responsibility of the insurance broker to offer the product that will best meet his or her client’s budget and family or business needs. Ultimately, it is the client who will determine the value of the purchase. The real question a potential client should ask is not “How much commission does my insurance agent get” but “Do I trust my insurance agent to look after my best interests?”

#2   “Your are Probably Over-Insured.”

Here’s the supposed scenario as suggested in the article:

  • You earn $100,000 per year;3408
  • The insurance agent offers you a $3 million life insurance policy KNOWING that this amount is too high;
  • You finally purchase a $1 million life insurance policy;
  • The agent wins because he walks away with something.

You have got to be kidding, right? The agent did not care as long as he walked away with some kind of sale?

If you have the right insurance agent, here’s what should really happen:

  • The insurance agent and the client determine the insurance need BEFORE recommending a policy;
  • The policy recommendation should be based on the income requirements of the surviving family, combined with any fixed rate of return the family would earn on the insurance, as well as the tax that they would need to pay.
  • Then – and only then – should the amount of insurance be discussed.

#3   “Whole Life Isn’t a Good Investment, Nor Is It Good Insurance”

Whole Life naysayers love to tout the advantages of term insurance coupled with investment in a good index mutual fund, stating that this will yield a better return, as well as offer more insurance.

In reality, Whole Life insurance is a majority bond investment and as such, should NEVER be compared to a mutual fund in terms of yield. The key to Whole Life is LONG TERM and a good adviser should not suggest a Whole Life Policy to any client looking for short term investment results.

On the other hand, if you ARE thinking long term, Whole Life can surprise you with a pot of money down the road based on bond returns, potential dividend distributions and an increasing death benefit.

#4  “He’d Rather Sell You an Annuity than a Life Policy”

That’s a little like saying a Realtor would rather sell you a mansion when you came in looking for a low-rent apartment. These two products are widely different and meet two very diverse client needs. No good insurance broker would try to replace one with the other.

Ultimately, the question that seems to arise time and time again is “Do I trust my insurance broker to look after my best interests?”  To reiterate one of my personal mantras and a favorite quote which you have no doubt read in previous posts: to have people entrust to you the safety of their hard-earned income is a privilege.


Man 1“Whoever is careless with the truth in small matters cannot be trust with important matters.”

Albert Einstein