STOP INVESTING IN SAVINGS PLANS, SUCH AS IRAs AND 401Ks, THAT WILL CREATE TAXABLE INCOME IN THE FUTURE!

You should always contribute to your 401K up to the maximum available for your employer’s matching contribution, but beyond that, you are setting yourself up for a future tax trap.

Most employers, that offer a matching 401K contribution, match 50% up to a 6% employee deferral - that is the most common 401K Plan design in the United States. Beyond that you should consider either a Roth 401K contribution, if your employer offers it, or a Roth IRA if you qualify based on the income limitations imposed by the IRS.

If neither is available, talk to your financial advisor about investing in a specially designed life insurance product where you pay the maximum amount allowed by law for the minimum insurance benefit possible. 

This type of cash value life insurance product is called a Non-Modified Endowment Contract (Non-MEC), which has unique tax benefits under the law, which include:

• No income qualification test and no contribution limitations – contribute as much as you want.
• Investments in the contract grow tax deferred and can be exchanged without tax (no capital gains taxes at any time) – you will not get an annual 1099 for income reporting purposes.
• Tax free distributions during retirement without required minimum distributions at any age – use YOUR money when YOU want or need to.
• No 10% penalty tax on distributions prior to age 59 ? such as with 401Ks or IRAs (even Roth 401Ks and Roth IRA's don't offer this benefit).
• In the event of death, your account balance is enhanced by the death benefit and paid income tax free to your named beneficiary. Does your 401K or IRA do that?
• The insurance benefit can be converted to a Long-Term Care benefit, tax free, if care is needed.

The benefits of cash value life insurance are rarely talked about and often misunderstood but it is a unique product protected by a very clear legal and tax guidance in the Internal Revenue Code.

As the national debt continues to increase, invariably, as suggested by Jim Millstein in the Bloomberg interview referenced above, income, capital gains and other taxes will go up - they just have to. Why defer income today at very low tax rates only to pay taxes when tax rates are higher?

I just watched a documentary titled The Power of Zero - The Tax Train is Coming by author of the book The Power of Zero, David McKnight. It is worthy of an hour of your time.