Blog #133: Best Strategy for an IRA (Part 1 of 2)

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

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

Getting Started with InsMark Training Video

spacer image

Strategy 1:  Stretch IRA
Strategy 2:  Charitable IRA
Strategy 3:  Roth Conversion

Bob Ritter's blog 133 image the best strategy for an IRA

Lion all mine image
Zero-Split-Case-Premium-Financing-click-here-to-receive-more-information
spacer image

Editor’s Note:  The term “IRA” is used generically in this Blog as comments about an IRA also apply generally to similar techniques for 401(k)s, Keoghs, and Profit Sharing Plans.

Harry and Angela Dorsey are ages 55 and 50, respectively, and plan to retire in 10 years.  At retirement, they want $150,000 a year in after tax cash flow indexed at 3.00% as inflation offset.

Below is a summary of their current net worth:

Net Worth
Harry and Angela Dorsey

blog-133-image-2-net-worth-asset-description-harry-and-angela-dorsey

1Plans are to sell the primary residence at retirement and live year-round in their Florida Townhouse.

As you will see, of the three strategies discussed below (Stretch, Charitable, or Roth), there is no best choice for an IRA as each one has its own advantages.  The worst choice is to make no selection at all as this guarantees the IRS an income tax windfall at the death of the second-to-die of Harry and Angela when income tax on the entire remaining value of the IRA is due.

Stretch IRA

Below is a graphic of the Dorsey’s overall net worth using a Stretch IRA after accounting for their retirement cash flow needs:

Image 1   
Stretch IRA   

blog-133-img-1-stretch-IRA-net-worth-after-required-cash-flow

Note:  A Stretch IRA is accomplished by naming heirs as the final beneficiary of the IRA after the death of the second-to-die of Harry and Angela.  The advantage of a Stretch IRA is that the tax deferred values of the IRA continue as tax deferred assets for heirs.

Charitable IRA

Below is a graphic of the Dorsey’s overall net worth using a Charitable IRA after accounting for their retirement cash flow needs:

Image 2   
Charitable IRA   

blog-133-img-2-charitable-IRA-net-worth-after-required-cash-flow

A Charitable IRA is accomplished by naming a qualified charity as the final beneficiary of the IRA after the death of the second-to-die of Harry and Angela.  Prior to that event, values in the IRA are freely available to the Dorseys without any interference by the charity.

While providing a generous gift to a favored charitable cause (the Red Cross in the Dorsey’s case), their children are short-changed by the amount of the gift of the IRA.  We offset this by providing for $1.5 million of indexed survivor universal life coverage bearing a $25,000 annual premium and paid for by withdrawals from their Muni Bond Fund.  Since projected estate taxes should not be an issue with the Dorseys, we kept the policy inside the estate where its cash values add to net worth and the children are beneficiaries of its tax free proceeds.  With larger estates, you will likely want to have the policy owned by an irrevocable life insurance trust formed on behalf of the children.

Roth Conversion

Below is a graphic of the Dorsey’s overall net worth using a Roth Conversion after accounting for all retirement cash flow needs including the income tax on the conversion:

Image 3     
Roth Conversion     

blog-133-img-3-roth-conversion-net-worth-after-required-cash-flow

To minimize the income tax on the conversion, we converted the IRA to a Roth IRA in $100,000 increments over 10 years and withdrew the income taxes caused by the conversion from their Muni Bond Fund.  The net worth numbers include the cash values of the same survivor life policy included in the Charitable IRA analysis.

Below is a graphic of the net worth of all three strategies including a comparison of the after tax cash flow supported by each strategy:

Image 4 
Net Worth Comparison 

blog-133-img-4-net-worth-comparison-after-required-cash-flow

As you can see from the breakdown of Strategy 3 net worth below, values in the Roth and the survivor life policy total $11,372,938 ($6,544,718 + $4,828,220) which is 71% of the total net worth of $16,010,258 – superb asset allocation considering the tax advantage of these two financial instruments. Serious amounts of additional cash flow are available to Harry and Angela throughout their retirement without tax using withdrawals from the Roth and loans on the survivor life.

Strategy 3 Net Worth

blog-133-image-3-strategy-3-net-worth

Below is a graphic of the wealth to heirs from all three strategies:

Image 5     
Wealth to Heirs Comparison     

blog-133-img-5-wealth-to-heirs-comparison

Below is a graphic of the charitable component Strategy 2, the Charitable IRA:

Image 6       
Charity Comparison       

blog-133-img-6-charity-comparison-wealth-to-red-cross

If the Dorsey’s charitable interests are significant, Charitable IRA may be hard for them to resist since, in addition to the generous gift to the Red Cross, both the long-range net worth and wealth to heirs results of Strategy 2 are substantial (see Image 4 and Image 5).

Reminder:  In all three strategies, the net worth and wealth to heirs is accomplished after accounting for all the cash flow requirements, including retirement cash flow, life insurance premiums, and income taxes.

Click here to review 69 pages of reports from this InsMark Wealthy and Wise® evaluation.  It is a large number of reports; however, with a Wealthy and Wise presentation, I recommend that you have all the reports for a given analysis with you when you are visiting with a client or client’s attorney or CPA.  The system backs up every number shown, and you never know which report you’ll need to have handy to answer the inevitable question, “Where did this number come from?” That’s why I provided all of them to you in this Blog.

Most Wealthy and Wise users select a few key illustrations for the main report and put the balance in supplemental sections or an Appendix.  More elaborate report organization can be accomplished (Table of Contents and Section pages) through use of the following prompt -- which I used for this Blog -- located on the bottom right of the Main Workbook Window:

blog-133-image-4-preview-or-print-client-presentation

Coming Attraction

Next week in Part 2, I’ll provide you with an irresistible additional reason that will make virtually all clients want the Roth conversion.

Licensing InsMark Systems

To license Wealthy and Wise, visit us online or 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 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

Blog133.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.

 

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 . . .”
Phillip Barnhill, CLU, InsMark Gold Power Producer®, Minneapolis, MN

“InsMark helps us help our clients understand their money and their choices.  I always learn something new that changes what we do and how we can do it more efficiently.  That translates to a better bottom line for us and for our clients.  It’s making more money for everyone -- just by pushing InsMark buttons on the computer.”
Kay Corbin, CLU, ChFC, InsMark Platinum Power Producer®, Phoenix, AZ

“I am writing to give you a ringing endorsement for the Wealthy and Wise System.  As you know, I am a LEAP practitioner.  The Wealthy and Wise software has helped me supplement my LEAP skills in the over age 60 client base.  I have been paid for many cases using Wealthy and Wise as support, the smallest of which was $27,000, the largest was $363,000.  With those type of commissions, you would have to be nuts not to buy it.”
Vincent M. D’Addona, CLU, ChFC, MSFS, AEP, InsMark Platinum Power Producer®, New York City, NY

 

Important Note #1:  The hypothetical life insurance illustrations associated with this Blog assumes the nonguaranteed values shown continue in all years.  This is not likely, and actual results may be more or less favorable.  Actual illustrations are not valid unless accompanied by a basic illustration from the issuing life insurance company.

Important Note #2:  The information in this Blog is for educational purposes only.  In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

seperator bar

More Recent Blogs:

Blog #132: The Calculation Magic of Wealthy and Wise®

Blog #131: Don’t Burn the Nest Egg™

Blog #130: Should I or Shouldn’t I?

Blog #129: Leveraged Executive Bonus Plan with Bank-Funding of the Income Tax (Part 3 of 3)

Blog #128: Leveraged Executive Bonus Plan with Bank-Funding of the Income Tax (Part 2 of 3)

 

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 #132: The Calculation Magic of Wealthy and Wise®

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

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

Getting Started with InsMark Training Video

Bob Ritter's blog #132 the-calculation-magic-of Wealthy-and-Wise image

Lion all mine image
Zero-Split-Case-Premium-Financing-click-here-to-receive-more-information
spacer image

One of the most comprehensive evaluations of InsMark’s wealth planning system, Wealthy and Wise®, comes not from InsMark, but from a long-time licensee and close personal friend, Simon Singer, co-founder of the American Tax Planning Institute.  Simon is also a life member of Top of the Table and past president and CEO of Forum 400.

Click on Video #1 below for his 17-minute presentation, and you’ll find out why we are so impressed with his perspective on the cash flow modeling features of Wealthy and Wise.

Video  #1

Next, if you would like to see the Wealthy and Wise software in action as it performs its cash flow modeling, click on Video #2 below, an InsMark presentation that involves a somewhat similar Case Study as Video #1.  Please pay particular attention to the section of Video #2 between minutes 1:30 - 3:55 where screen shots of Wealthy and Wise data entry are featured that determine the best order of accessing assets for the most efficient retirement income and long-range net worth.

The remaining four minutes of Video #2 extend the evaluation to include a Roth conversion (tax cost paid by asset withdrawal) coupled with gifts to an irrevocable trust for the purchase of life insurance, the combination of which is especially efficient for the couple involved in the analysis.

Video  #2

Note:  Many clients are reluctant to engage in a Roth conversion due to the income tax consequences.  Using assets as a source of the tax almost always results in higher overall net worth; thus, the tax should properly be viewed as an investment, not a cost.  This change in perception is of critical value to a client, and only Wealthy and Wise can reflect it accurately due to its cash flow modeling strategies.

The American Tax Planning Institute (ATPI)

Click here to review the mind-blowing benefits of ATPI membership.  I have personally attended two quarterly meetings hosted by ATPI co-founders Simon Singer and Rao Garuda.  In my opinion, there is nothing available that comes close to it as a sales and marketing resource.  One of the benefits of a ATPI Platinum or Gold membership that we are most proud of is that ATPI pays all the fees for each such member to be licensed for InsMark’s Platinum Power Producer suite of products1.

1Retail licensing fee for the InsMark’s Platinum Suite of products consists of a $4,995 initial fee and an ongoing monthly fee of $295 which covers all enhancements and upgrades as well as technical support.

Licensing InsMark Systems

To license Wealthy and Wise, visit us online or 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 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

Blog132.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.

 

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
Blog #132

“InsMark has created without question the best suite of software for our industry that has ever existed.  I personally have been using their software for almost 30 years, and it changed my career.  This unique and user friendly software will add many thousands to your income for as long as you’re in business.  InsMark makes me look good, and it will you as well.”
Simon Singer, CFP®, CAP®, RFC®, International Forum Member, InsMark Platinum Power Producer®, Encino, CA

“If you don’t get the client to distinguish cash flow from net worth, you won’t make the case sale. In my experience, Wealthy and Wise is the only system that recognizes this important estate planning component.”
Stephen Rothschild, CLU, ChFC, CRC, RFC, International Forum Member, Saint Louis, MO

“For three decades, InsMark software has been the leader in presentation software for life insurance.  However, my favorite retirement, estate and charitable planning software is InsMark’s Wealthy and Wise combined with DOD (Documents on a Disk).  Nothing holds a candle.  If you are in the retirement, estate or charitable planning arena, this is the easiest AND most powerful software on the planet.  I highly recommend it.”
Scott Keffer, Advisor Coach, Best Selling Author, Creator of Double Your Affluent Clients®, Pittsburgh, PA

 

Important Note #1:  The hypothetical life insurance illustrations associated with this Blog assumes the nonguaranteed values shown continue in all years.  This is not likely, and actual results may be more or less favorable.  Actual illustrations are not valid unless accompanied by a basic illustration from the issuing life insurance company.

Important Note #2:  The information in this Blog is for educational purposes only.  In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

seperator bar

More Recent Blogs:

Blog #131: Don’t Burn the Nest Egg™

Blog #130: Should I or Shouldn’t I?

Blog #129: Leveraged Executive Bonus Plan with Bank-Funding of the Income Tax (Part 3 of 3)

Blog #128: Leveraged Executive Bonus Plan with Bank-Funding of the Income Tax (Part 2 of 3)

Blog #127: Leveraged Executive Bonus Plan with
Bank-Funding of the Income Tax (Part 1 of 3)

 

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