The Best Way to Maximize Your Tax-free Retirement AND Leave Your Kids Tax-free Money
(don’t forget to checkout the video too)
I wrote a blog awhile back about why you want to avoid leaving your kids taxable retirement money (from 401k’s, IRA’s, 403b’s, etc) because it can create a tax problem for them down the road.
When your kids inherit taxable retirement money, they are forced to take the money out of the accounts in a set time period, so that they can pay taxes on the distributions.
If they are earning a good living themselves, these distributions can easily force them into a higher tax bracket, creating an unnecessary tax in their peak earning years.
This often puts children in a precarious situation where they are having to make all sorts of financial decisions that they wouldn’t otherwise make, just to minimize the impact of the IRA distributions.
Now leaving money to your kids is always something to be admired, you just want to be smart and strategic about how you do it.
If instead of leaving behind a taxable account, like a traditional IRA, you leave a Roth IRA to your children, that is much better alternative.
Roth IRAs are a great way to leave tax-free money behind (since they will not cause a tax problem for your children).
But, a Roth IRA is still not the most ideal way to transfer wealth…
It’s also not the cheapest way to transfer wealth either.
Leaving a Roth IRA to your children is certainly not a bad thing, but it should really be used to maximize your own tax-free retirement (that really is the optimal use for a Roth IRA, plus pulling money from a Roth IRA in retirement can help you collect social security tax-free as well)!
So if you have leveraged a Roth IRA for your own tax-free retirement, then your next objective should be to use the best tool available, specifically designed to transfer tax-free wealth with the smallest possible price tag. 😏
This is done with life insurance but not just any type of life insurance.
I often talk about accumulating tax-free wealth by using life insurance, but if you are transferring wealth, it has to be a completely different type of policy.
The best way to transfer wealth is with the lowest cost, joint-life policy, not designed to grow your cash value at all, but simply provide maximum tax-free benefit that’s guaranteed to be permanent.
These are types of estate planning policies that are often used to provide liquidity to trusts.
If you execute a strategy like this effectively, you maximize your own tax-free retirement, you transfer as much as tax-free wealth as you would like to (for pennies on the dollar), while simultaneously giving yourself permission to spend all of your tax-free retirement savings, since you aren’t trying to preserve any for your children.
This truly is the best of both worlds, and if done effectively, you can avoid taxes for yourself and for your children.
The best of both worlds.
Let’s chat 💬😎
Connect With Me & Access All My Resources Here
Enjoy this blog? You’ll probably enjoy this one as well: 54-year-old with a Laddered Tax-free Retirement & a $1.5M Tax-free Legacy
To your success,
Matt
