Blog #105: Stretch, Charitable, Roth
      (Three Smart IRA Strategies)

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(Presentations in this blog were created using the InsMark Illustration System and Wealthy and Wise®.)

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IRA Problem: Income tax at death.

IRA Solution: Stretch, Charitable, Roth — any one of them is vastly superior to leaving an IRA subject to income tax at death.

Don Prehn and Steve Savant have put together an informative video that examines each alternative.  It’s in two parts with the first segment (seven minutes) discussing the three options and the second segment (six minutes) covering the Roth IRA in more detail.

The main takeaway from the Roth evaluation is this:  The tax cost to convert to a Roth is not a cost at all; it is an investment that produces a terrific return both for your clients and their heirs.

Click on the image below to begin the video.

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One thing I hope you didn’t miss near the end of the first video segment is Don’s discussion of the value of an Inherited Roth IRA.  While there are plenty of reasons discussed in both segments as to why a Roth conversion is valuable, the gain to the heirs in after tax cash flow of more than $17 million from the Inherited Roth is extraordinary:

  • $    3,671,890 total after tax cash flow from the Inherited IRA.
  • $ 20,967,997 total after tax cash flow from an Inherited Roth IRA.

That’s a 571% increase.  Hard to believe?  Click here to review the Inherited IRA vs. Inherited Roth IRA comparison Illustrations from the InsMark Illustration System.

For a more detailed analysis of the Roth alternative, go to Blog #81: Economics of a Roth IRA.

 

InsMark’s Digital Workbook Files

If you would like some help creating customized versions of the presentations in this Blog for your clients, watch the video below on how to download and use InsMark’s Digital Workbook Files.

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Digital Workbook Files For This Blog

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Experienced Zip File Downloaders Download the zip file, open it, and double click the Workbook file name to open it in your InsMark System.

Note:  If you are viewing this on a cell phone or tablet, the downloaded Workbook file won’t launch in your InsMark System.  Please forward the Workbook where you can launch it on your PC where your InsMark System(s) are installed.

 

Licensing InsMark Systems

To license any InsMark System, contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

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Gary Sipos, M.B.A., A.I.F.® InsMark Platinum Power Producer®, Sipos Insurance Services, San Francisco, CA

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More Recent Blogs:

Blog #104: Good Logic vs. Bad Logic™ (It’s All About the Math)

Blog #103: Charging Monitoring Fees for a Client’s Wealth Plan

Blog #102: Linking Indexed UL with Disability Income Insurance
(Part 2 of 2)

Blog #101: Linking Indexed UL with Disability Income Insurance
(Part 1 of 2)

Blog #100: Mysterious Fees for Mutual Funds

 

3 Reasons Why It’s Profitable For You To Share These
Blog Posts With Your Business Associates and
Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive

 

Blog #104: Good Logic vs. Bad Logic™ (It’s All About the Math)

(Click here for Blog Archive)
(Click here for Blog Index)

(Presentations in this blog were created using Wealthy and Wise®.)

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One of the problems with most retirement plans today is they address only two of the three key issues.  The two that are typically addressed are:

  • Pre-retirement asset allocation;
  • Post-retirement asset allocation.

The one usually not addressed is:

  • The order in which assets are accessed for cash flow that produces the best long-range net worth and wealth to heirs.  We call it Good Logic vs. Bad Logic™ when it is done efficiently.

When cash flow is needed, advice that determines which assets should be accessed, and in what order, is vitally important.  Why is this typically overlooked?  It’s simple — with, say, five different asset classes and 30 years of cash flow, 3,600 calculations are needed to determine the best order.  With six assets, 21,600 calculations are needed; with seven, 151,200.  This is not something that can be handled by a simple Excel spreadsheet.

We built an algorithm in InsMark’s Wealthy and Wise® for this very complex calculation, and the results are dramatic as you will see.

Don Prehn and Steve Savant, both consultants to InsMark, have created a very interesting video that discusses this issue in two segments.  The first segment is 6 minutes concluding with the second segment of 5 ½ minutes.  Normally, I would present each one in successive blogs, but the information is so sequential that they flow better if shown together.  You’ll be glad you watched them both.

Click on the image below to begin the video.

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The two major takeaways I want you to have from both video segments are:

  • There is a significant increase in both net worth and wealth to heirs that is created through the application of Good Logic vs. Bad Logic™;
  • Reallocating current assets to purchase an investment grade life insurance policy usually produces a meaningful increase in net worth or retirement cash flow — or both.
Life insurance has been traditionally viewed as “expensive”, but the client’s perception is markedly different when the results shown in the video can be achieved.  Below is a quote from an article in the December 2014 issue of Trusts & Estates by Bill Boersma entitled “Life Insurance as an Asset Class” in which he states:
“I can only wonder if another asset with the same qualities would be implemented more frequently if it wasn’t called life insurance.”

If you would like to review more details of the material presented in the video, please go to Blog #35: Revisiting the Pothole in Wealth Planning and Blog #71: When Life Insurance Doesn’t Work — or Does It?

 

InsMark’s Digital Workbook Files

If you would like some help creating customized versions of the presentations in this Blog for your clients, watch the video below on how to download and use InsMark’s Digital Workbook Files.

New Zip File Downloaders
Watch the video.

Digital Workbook Files For This Blog

Blog104.zip

Download all workbook files for all blogs

Experienced Zip File Downloaders Download the zip file, open it, and double click the Workbook file name to open it in your InsMark System.

Note:  If you are viewing this on a cell phone or tablet, the downloaded Workbook file won’t launch in your InsMark System.  Please forward the Workbook where you can launch it on your PC where your InsMark System(s) are installed.

 

Licensing InsMark Systems

To license any InsMark System, contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

Testimonials:

“Major cases we are developing have all moved along successfully because of the sublime simplicity and communication capability of Wealthy and Wise.  I guarantee that the proper use of this tool will dramatically raise the professional and personal self-image of any associate who dares to take the time to understand it… ”
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Stewart King, Wealthy and Wise Licensee, Bayboro, NC

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Scott Keffer, Advisor Coach, Best Selling Author, Creator of Double Your Affluent Clients®, Pittsburgh, PA

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More Recent Blogs:

Blog #103: Charging Monitoring Fees for a Client’s Wealth Plan

Blog #102: Linking Indexed UL with Disability Income Insurance
(Part 2 of 2)

Blog #101: Linking Indexed UL with Disability Income Insurance
(Part 1 of 2)

Blog #100: Mysterious Fees for Mutual Funds

Blog #99: One More Time – The Value of “You” to Your Clients

 

3 Reasons Why It’s Profitable For You To Share These
Blog Posts With Your Business Associates and
Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive

 

Blog #103: Charging Monitoring Fees for a Client’s Wealth Plan

(Click here for Blog Archive)
(Click here for Blog Index)

(There are no InsMark presentations used in this blog.  It is a an informational blog only)

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I have been asked by several readers about the compliance issues regarding charging monitoring fees for the annual management of various aspects of a client’s overall financial plan.  Such fees were discussed in Blog #97 and illustrated in Blog #98.

The facts and circumstances discussed in Blog #98 are very powerful, and several opportunities to charge monitoring fees were presented.  The fees were included within the Wealthy and Wise analysis in Blog #98 and paid by asset withdrawal, not from the client’s personal cash flow.

I asked Mark Pace, the guest author of Blog #97, to comment on this compliance question.  I am certain that his remarks will interest you.

Comments from Mark Pace, CLU, RHU, ChFC, President, ObjectiView, Inc.

This question of monitoring fees actually reminds me of the broker/dealer’s response in the mid-1970s to the whole concept of charging fees to manage mutual funds.  Their response at that time was “Why would you want to charge a fee for something that already has performance management fees built in?” But look where we are today!

This discussion, in my opinion, boils down to:

  • Education
  • Liability
  • Money

Education

As you can see from my opening comment, before the mutual fund market really took off, a common language and consensus about what managing mutual funds meant and why it was important had to be created and shared among all stakeholders.  The same holds true for managing life insurance.  It is clear we have to help educate advisors, consumers and the broker/dealer community that life insurance is an asset with complex performance rights – particularly the universal life products – that need some form of ongoing management.

Liability

The broker/dealers will likely make the case that this is adding liability for which they then need to be compensated.  I contend that providing performance management actually dramatically reduces liability; particularly when it is done from the inception of the policy.  In fact, as an advisor, I would start with liability reduction as a powerful argument for performance management fees.

Additionally, there is an important distinction between variable products, which are a security and clearly under the purview of the broker dealer, and fixed products, which are not a security even though many broker dealers contend they are.  The IUL products give broker/dealers even more fuel for this smoldering fire.

Money

This is really all about money.  The broker/dealers have been trying to gain complete purview over every line of business in which the registered rep is involved.

In summary, if I were the advisor, I would approach the broker/dealer with the proposal that managing the fixed products is an outside business activity… one that I would disclose to them.  I would attempt to get by without paying the broker/dealer compensation.

On the variable product side, because it is dealing with a security, a compensation method that meets the broker/dealer’s compliance requirements needs to be created.  This would most probably be seen as another activity within the RIA and therefore you will need to share the fees.

The issue here is if we are dealing with the broker dealer’s RIA or an advisor’s separate RIA.  If it is the broker/dealer’s RIA, they would have to make this a policy change for the entire system and complete the requisite amendments to their ADV.  If it is an advisor’s RIA, it is a simple as making the adjustments providing for the management of life insurance and associated fees… just as many of the larger AUM firms have done.  The other option is to build this into your annual financial planning fee, which can be done either by the broker/dealer or the independent RIA, and I’ve seen both.

Note:  The advisors should also check state and insurance company regulations before monitoring charging fees.

Licensing InsMark Systems

To license any InsMark System, contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

seperator bar

More Recent Blogs:

Blog #102: Linking Indexed UL with Disability Income Insurance
(Part 2 of 2)

Blog #101: Linking Indexed UL with Disability Income Insurance
(Part 1 of 2)

Blog #100: Mysterious Fees for Mutual Funds

Blog #99: One More Time – The Value of “You” to Your Clients

Blog #98: The Value of “You” to Your Clients (Part 2 of 2)

 

3 Reasons Why It’s Profitable For You To Share These
Blog Posts With Your Business Associates and
Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive