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LIFE INSURANCE PLANNING

Reasons to consider getting a life insurance policy...
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LIFE INSURANCE ADVANTAGES

Tax implications are important details to consider when deciding where you will devote your money for the future. There are so many instances where people enter into retirement investments thinking that amount will be available just to find out a large portion will be inevitably dedicated to a tax bill. We here at Rise Financial Group understand that each dollar is important, which is why we would like to discuss the many substantial tax advantages associated with life insurance products.

One big tax advantage to using life insurance products is the proceeds of a death benefit are excluded from federal income tax. The proceeds are customarily received in one lump-sum, tax free, minus any policy loans and interest associated with those loans.

TAX-DEFERRED CASH VALUE GROWTH

The next advantage would be the tax deferred cash value growth. When the premium payments exceed the policy’s expenses and insurance costs, the cash value continues to accumulate along with the interest that is credited to the policy’s cash value each year. Life insurance is one of few products that accumulates cash and gives the option to defer the taxes of the cash value and structure distributions of those funds tax free. There are advantages in other retirement and savings plans that have tax deferred growth as well.

Policy loans have the possibility to be accessed tax free. This can be accomplished as long as the life insurance policy is not classified as a Modified Endowment Contract (which happens when a life insurance policy becomes overfunded), according to the Internal Revenue Code (IRC). If the policy is not classified as such, withdrawals are not subject to tax until the cash value withdrawn exceeds the policy’s premium basis. Future withdrawals are subject to taxation once a policy’s basis has been withdrawn. Additional conditions apply to taxing loans such as if a policy is surrendered or lapses. If this happens, any outstanding loans are treated as cash value distributions and are then subjected to taxation if the amount is greater than the policy basis.

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SWITCHING INVESTMENT POSITIONS

Other tax advantages include not being taxed on funds accessed through the life insurance policy before the age of 59 ½ for possible retirement purposes (as long as you meet IRC guidelines), being able to switch investments within a portfolio without incurring additional taxation, and not adding to a tax burden as personal income increases like many other taxable accounts do.

If you’re looking for a great supplement to any retirement or savings vehicle, life insurance is a great option with many tax advantages. It is important, however, to understand how those tax advantages work to your best interest. There may be additional tax rules and regulations that require a more detailed analysis; this is why we recommend you also contact your CPA or tax professional to discuss your individual situation.

WE ARE COMMITTED TO HELPING...

Learn all the benefits of owning Life Insurance, including tax benefits, portfolio protections and Long-term care coverage. Please click the button below to schedule a no-obligation appointment with a Registered Investment Advisor

FAX: (480) 409-7244

3303 E Baseline Rd #107  Gilbert, AZ 85234

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©2024 by Rise Financial Group

Disclosure: All written content on this site is for information purposes only. Opinions expressed herein are solely those of Rise Financial Group and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or  completeness. All information and ideas should be discussed in detail with your individual adviser prior to implementation. Insurance and Advisory services are offered by Rise Financial Group a Registered Investment Advisor in the States of Arizona, Minnesota, North Dakota, or where otherwise legally permitted.  The presence of this web site shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the States of Arizona, Minnesota, North Dakota, or where otherwise legally permitted.  Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. Rise Financial Group does  not offer tax planning or legal services, but may provide references to accounting, tax services or legal providers.  You should always consult an attorney or tax professional regarding your specific legal or tax situation. Rise Financial Group is not engaged in the practice of law.  Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours.   Images and photographs are included for the sole purpose of visually enhancing the website. None of them are photographs of current or former clients. They should not be construed as an endorsement or testimonial from any of the persons in the photograph.

Neither Daniel Anderson nor Rise Financial Group are associated with, endorsed or employed by the Social Security Administration or any Government agency.

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