Do you think that taxes are going to be lower in the future? Do you think that they are going to stay the same? Or do you think taxes are going to be higher in the future?

Take a look at the national debt.  Taxes have to increase if we as a country are going to get out of this mess. So is deferring taxes really a good idea? Yet what you hear from your CPA and water cooler buddies is that you shouldn’t take money out of your IRA because you will have to pay taxes.

Think about this: You are going to have to pay taxes at some point…the IRA only defers taxes. At 70½ the government is going to force you take out your Required Minimum Distribution (RMD).

Love Financial can show you how to systematically take back control of this ticking tax bomb and create a tax-free environment not only for you, but also for your family.

The four types of money shows that tax-free money is at number 2, but we will take it all day long.

Let’s look at an example of the IRA Rescue.

Del just turned 70½ and the government now will force Del to start his RMD (or get a nice 50% penalty) not only this year, but every year–at 100% taxable. Del really does not need this money to live on, and has opened his own Your Family Bank® account. He can now use his RMD every year to fund his Your Family Bank® account, and still have access and control of his money. Now the money he is forced to take out of his IRA is accessible to be withdrawn if he needs it in a tax-free environment.

Another benefit is that if something happens to Del, his family will receive the death benefit income tax-free.

The ticking tax bomb is not just for RMDs! If you have an IRA or 401(k) or any qualified account (qualified by the government) Love Financial can advise you on a systematic procedure to defuse what you will have to pay to the government even if you are under 59½, using IRS code 72t.

Ok, we don’t want to lose you, but here it is:

“Section 72(t)(2)(A)(iv) provides, in part, that if distributions are part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancy) of the employee and beneficiary, the tax described in section 72(t)(1) will not be applicable.” (Source IRS.gov).

So what does that mean?  Before age 59 ½ a person can withdraw equal payment from their IRA for a period no shorter than five years or until they are 59 ½ without incurring a 10% penalty. (Please consult with a tax adviser before withdrawing funds from your qualified plan.) You still owe the tax, but you don’t incur the penalty.

Let’s look at an example.

Don is fifty years old and has $300,000 in his IRA. Don is worried about future tax rates but doesn’t want to pay the 10% penalty. Don contacts a Love Financial and finds out that his maximum distribution is $14,660. The maximum 72t distribution of $14,660 per year was calculated by the “fixed amortization method” at 3.25%. To avoid penalties, payment must last for five years (the five-year period does not end until the fifth anniversary of the first distribution received) or until you are 59 1/2, whichever is longer.

Don elects the 72t for the next 10 years to fund his Your Family Bank® account. At age 60 Don now has approximately $166,000 in cash value in his Your Family Bank® account that is now TAX-FREE. His IRA is still worth $236,297, which is taxable.

Last but not least, he has a death benefit that would go to his family of $536,307.*

If you think that taxes are going up, this is a no-brainer. Love Financial can guide you through this process to see if it is right for you.

*Other possible distribution methods were available. This is a hypothetical illustration, contact Love Financial for an illustration.