If our country continues spending money we don't have, skyrocketing credit debt and ignoring financial burdens, our grandchildren will be in serious trouble. America will be broke. We basically already are. Too many people are spending money they don't have. Take Joe for example. He applies for a Mastercard at his bank, which he is approved for $2,000. However, Joe, on a $40,000 annual salary and a $1,000 montly rent for his high-rise apartment, can't afford a $2,000 monthly credit card bill, yet he continues to ring up the bill anyway. It has been happening in many households for decades.
So what are we young folks to do when it's time to retire and we have no social security or other safe government retirement options? Start saving now.
People have options when it comes to retirement vehicles. We have tax-deferred annuities, which means you don't pay taxes until the money is withdrawn or distributed, and they can be used as an IRA, 401(k) or any other type of qualified retirement plan. We also have tax-free options like Roth IRAs.
A Roth IRA is one way someone can generate tax-free income because the money is taxed as it is put in the policy. Just like tax-deferred plans, the Roth IRA can be vehicled by an annuity. However, because it's taxed going in, it's tax-free coming out, assuming the policyholder is qualified to take a tax-free distribution. The problems with Roth IRAs are contribution limits and income limits. A person under 50 cannot contribute more than $5,000 and persons over 50 can contribute only up to $6,000 in 2009.
That being said, one other option is available for tax-free retirement: Maximum Cash Value Life Insurance, also known as MCV Life.
Patrick Kelly, author of Tax-Free Retirement, exclaims that life insurance is more than a "necessary evil." Aside from its obvious benefits (death benefits, long-term care riders, etc.), it has living benefits in which most people are not familiar like tax-free loans against the cash value that technically never have to be reimbursed.
Loans against the cash value of a life insurance policy are not taxed by the government, and as long as the policy doesn't lapse, they never have to be paid back. However, for this to work one must pay higher premiums than just the bare minimum, hence the term Maximum Cash Value. This protects the policy from lapsing, and builds cash value while protecting the death benefit.
Kelly perfectly illustrates this concept in his book. It's a beautiful concept and one that people need to know.
Don't let the government have your money. Consider MCV Life as a retirement option. Who knows how much taxes will be when it's time for you to retire?
