By William D. Dyer

Your government sponsored retirement plan (IRA, 401K, SEP..) is not your money. It’s the governments!

I met with a colleague who asked me how much I had in my 401K. I proudly told him the amount since I have been saving for 15 years, and then he asked me how much of that money is mine.

What do you mean I asked? I thought it is all mine. He pointed out that since I am in my 40’s now, say I retire at 70 and I have a million dollars as an example. I take out $70,000 to live off of. The feds take 30% (roughly today’s taxes) and the state of CA takes 10%. He then posed what the future tax rate might be with the trillion dollar deficit from the federal and billion dollar deficit from the state in 25 years. What will the rate be then – higher or lower? I concurred higher. So lets say the government lets you keep 45% and taxes you 55%. Then he went on with an example of three retirees in CA.

My friend asked me which one I wanted to be: the guy who is hoping for lower taxes in the future or the guy with tax free income since loans from life insurance policies are tax free. I hit him back with life insurance is not a good deal and he showed me how I would get 5% tax deferred, and if I die my loans are paid off and my family gets the money.

I said 5% is not a good return. He rebutted by asking me if I have received 5% from my investments for the past 15 years, year after year. That shut me up, along with knowing that I can take the money tax free at retirement. This converted me. I am buying a policy for myself and I am recommending them to my clients. Also, there are ways to find the premium for these whole life insurance policies without it coming from your daily living, which he also showed me.

HCP National is a life insurance broker offering term life insurance and whole life insurance. Our life insurance department is located in Aliso Viejo, CA. The above is a general discussion of insurance. It is by no means a promise of coverage or anything definitive. Always read your policy and review it with your counsel to determine how your coverage will respond to claims.