CHAPTER TEN
Eliminating Tax Risk
“The avoidance of taxes is the only intellectual pursuit that still carries any reward.” ~ John Maynard Keynes
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et’s think back to the tax chapter. As you remember, there are two kinds of savings approaches: • Tax-deferred , which means you do not pay taxes on your contributions today, but you pay taxes on your contributions and all the earnings in your account when you get the money in retirement. This is your typ- ical 401(k) or IRA. • Tax-free , which means you pay taxes now on your con- tributions, but then they grow tax-free. When you go to retire, you don’t owe any taxes on the money when you receive it. This is how Roth IRAs work, and also how IUL works.
Properly structured, you can access funds from an IUL policy completely tax-free. That’s what Section 7702 of the U.S. Tax Code allows. The funds you grow in your policy can be used with no tax due. You remember this example about my client, Paul?
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