The Secret to Retirement Planning with Minimal Taxation

Financial planning and taxes in your retirement years does not have to be a scary thing for baby boomers and retirees. In fact, there are very simple ways to safeguard your retirement income from both volatility and taxation. In this video Rob discusses where IRA’s, 401k’s, and 529 Plans fit in the spectrum of taxation and financial planning.

A few of the key topics in this video that you will learn are:

Capital gains versus ordinary income tax
Tax-free versus tax-deferred
Where annuities fit in your retirement plan
How a private pension is a viable alternative investment.

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35 Replies to “The Secret to Retirement Planning with Minimal Taxation”

  1. Two slight discrepancies.  50% of 7500 is 3750.  Also, where do you get $1,000 / mo. cont. for the private pension when he is contributing $7,500 for the year in his 401k.  Otherwise, good job,

    1. Agreee, not only the person is conributing $625 a month ($7,500/12) but the other option ($1,000) is after tax! So it is probably $1,250 before tax. Almost twice as much. How can you even compare the two?

  2. Two words, in capitals for emphasis:  CAP DROPS.  That’s a point agents never communicate to clients, that insurance companies change the game by lowering caps once premium money is in their coffers.  Any honest, seasoned agent knows this;  the history of the industry is obvious and absolutely one-sided on it.  So, two more words (again in caps) which are apt when using the euphemism “private pension”:  SNAKE OIL.  And I am a licensed life insurance agent.

    1. We agree with your point on caps as this is something that consumers must certainly watch out for. It is always important to know the worst case scenario on any moving part of a contract (like caps), and to always ask yourself if it still makes sense if the caps hit the contract minimums. If you are buying the indexed annuity or life insurance for the caps, then it is probably not in your best interest.

      However, if you are buying it for the contractual income guarantees (aka buying it for what it WILL do, not what it MIGHT do), then caps do not play a very significant role.

      Finally, we aren’t sure why this agent is comparing the term private pensions to “snake oil sales” as that simply isn’t the case. A annuity is a pension and a pension is an annuity…plain and simple. By calling it “private” because you own and control it instead of a defined benefit plan via a corporation is irrelevant.

    2. +Rav Barring Rav, baloney.  Name the carrier whose cap increased from 15% to 18%.  On an IUL?  No way.  Not on an existing policy, anyway.  You’re either lying, or you’re living in a parallel universe, or you’re confused.  Maybe a new policy was introduced with a cap of 18%, but if that’s the case, I guaran-frickin-tee you that the expenses are outrageous on it.

      I own a policy myself.  I purchased it with a cap of 17%.  It was the best policy on the market at the time, illustrating at 9.73%!!!  The cap is now 8.5%.  I have sold another carrier with a sterling reputation.  Its cap dropped from 14% to 11.25% before recently being raised back to 11.75%.  I was urged to sell another carrier (by an oily MGA) I didn’t feel right about.  Highly-rated, blah blah blah.  Cap started at 17%.  It went down to 12% before being raised to 13%.  Want me to keep going?  I can.  And somehow your clients’ caps raised from 15% to 18%?  Come on…

      To the moderator:  point taken on private pensions if the source is an annuity.  I was thinking IUL, which I find highly unreliable because of potential cap drops.  But you are right about the application of annuities.  Thank you for clarifying and correcting me;  I agree with your point.

    3. +AssureYourWealth . Interest rate caps in IUL are dependent on bond portfolio rates and the cost of the index options. Cap rates cannot go up as bond interest rates go down and we have not seen a rising interest rate environment in bonds since the early 80’s. When bond rates begin to rise over time, it is conceivable that the caps would increase. IUL products are not created in a vacuum. On another note, you could be a little more civil in your disagreement.

    4. The problem I have with life insurance is that term insurance can be a good deal, but salespeople try to steer you to products that combine (in opaque ways) life insurance and retirement savings.

  3. your comparison of 401K and Roth is completely off. 401K grows at a much much higher rate because of the pre-tax AND company match advantages. I’ve done the math so many times, and take actual numbers and grow both over 30 years and 401K, even though taxed later, will always be much much more than a Roth

    1. 28jonmark, You know what. You are right! Traditional account is superior because itemized deductions do save you thousands and thousands with traditional account. If you don’t have an account or have Roth investment you cannot itemized your tax deductions at all. On top of that, you still have to file your code Q withdrawal with the IRS. I thank you for your enlightenment. You truly are a master in accountancy.

    2. I am in a high tax bracket right now. Investing in a Roth makes no sense for me. I want to defer those taxes for when I am in a lower tax bracket. I only have 9 years left until retirement.

  4. The 401K analysis is wrong because you didn’t include the benefit of NOT paying state taxes on wages.  That deferral is very important as those dollars are working for you.  Thus, if you move to a state in retirement that doesn’t have state income taxes (like so many people do), you’re not paying state income taxes on the flip-side.  Win-Win

    1. It is my understanding that states are desperate to find a way to tax the pensions of people who lived in the state when they were employed, but have retired in a jurisdiction with low taxes.

  5. @RetirementThinkTank- you’re thanking everyone for sharing but haven’t addressed the glaring issue with your contribution math. How are contributing 7,500/year pre-tax ($625/mo pre-tax)  and 1,000/mo after tax even close? If someone took that same 1,000/mo and contributed the pre-tax money to their 401k that would conservatively be a 1,300/mo contribution. Keep the match the same (well, 3,750 b/c that’s actually 50% of 7,500) you are looking at 19,350 pre-tax invested annually in the 401k vs. 12,000 after tax in the private pension. 

    The argument that this money will be taxed at withdrawal doesn’t hold for me either, b/c someone earning 150,000 annually is in the highest tax bracket, and pulling 1,400-2,000 a month in retirement will likely see them paying no tax income at all, obviously depending upon other income sources.

    1. +Ryan Clark Thank you! I was about to go through writing all that as well. This is a joke of a comparison. If someone can contribute $1,000 post tax, he can certainly contribute that (or more) on a pre-tax basis. This video was nothing more than further annuity jibberish. Annuities are garbage and “private pensions” are no different.

  6. I’d have a hard time leaving my planning up to a guy who can’t divide by 2! (8:57-9:06).  Also, as others have already commented, his contribution amounts are FAR lopsided to the Personal Pension Plan.

    With that said, the ROTH vs. Traditional IRA argument is not just one of numbers:  The benefits go far beyond that.  I am a fan of Roth IRA, but one can invest their tax-free money far more efficiently than a PPP, especially while still working!

  7. wow … VERY badly done what a scam artist … ThinkTank should really pull this video
    “IRA/401k tax deferred pot same as after tax pot”. … WRONG
    IRA is LARGER (so tax rate will determine best choice)
    $1000 contribution per month “fundamentally the same as $7500 per year ” … WRONG
    its 60% higher contributions
    “1177 out is very close to 1404” WRONG
     its 17% LESS

    1. I logged in to post the same thing, and noticed you beat me to it by 2 weeks. Maybe the guy who created the video gets to keep the $500 his math shortchanges us by?

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