Flexibility for High-Income Earners Through Specially Designed Life Insurance

Flexibility for High-Income Earners Through Specially Designed Life Insurance


Unlocking Financial Freedom with Specially Designed Life Insurance

It’s a common scenario for successful, high-earning professionals: Decades of disciplined saving and investing have led to substantial nest eggs in retirement plans. But now, you find yourself in a financial bind. Despite your wealth, your money is largely inaccessible, tied up in retirement funds until a specified age. On top of that, the looming specter of significant tax burdens both now and in the future adds another layer of concern.

Fortunately, there’s a viable solution that enables you to access your cash while maintaining the benefits of tax-free growth: a specially designed life insurance policy.

The Challenge of Tax Burdens and Limited Liquidity

High-income professionals often face a dual tax burden. Your current high income places you in a high tax bracket, reducing the net income you have available for investment. Meanwhile, the money you’ve diligently saved in your retirement plans will be subjected to potentially hefty taxes upon withdrawal later in life.

Additionally, while retirement accounts are great vehicles for long-term savings, they lack flexibility. You’re penalized for early withdrawals, leaving you without a readily available source of funds for unexpected opportunities or emergencies.

This lack of liquidity can be problematic if you’re looking to invest in new business ventures, diversify your portfolio, or manage unexpected expenses.

Specially Designed Life Insurance for High-Income Individuals

For high-income individuals grappling with these issues, a specially designed life insurance policy may be the answer. This financial strategy utilizes a high cash value life insurance policy to facilitate tax-advantaged growth and offer flexibility that standard retirement accounts can’t match.

Here’s how it works:

  1. The premiums you pay into your life insurance policy build cash value over time on a tax-deferred basis, similar to retirement accounts.
  2. The cash value in your policy can be accessed at any time for any reason without penalty. These withdrawals are generally tax-free as they are considered loans against the policy’s death benefit and cash surrender value.
  3. These policy loans have flexibility, meaning they are not required to be repaid during your lifetime and can be deducted from the death benefit or cash surrender value when the policy pays out.

This strategy enables you to tap into your wealth when needed, providing the liquidity to seize investment opportunities or meet unexpected expenses. At the same time, your cash continues to grow tax-free within the policy, aiding in building tax-favored wealth.

When accessing the cash value of your life insurance policy through policy loans, interest is generally applied to the borrowed amount. This interest charge is an aspect that policyholders must strategically manage to maximize their policy’s effectiveness.

However, a well-designed life insurance policy provides an opportunity to offset these interest charges. The growth of the cash value within the policy, when effectively managed, can potentially offset the interest applied to the policy loan, thereby recapturing the costs.

It’s crucial to discuss this strategy with a professional well-versed in specially designed life insurance policies. Their experience and understanding of these designs can help you leverage the full benefits of your policy, effectively manage potential costs, and navigate the nuances of policy loans.

Benefits beyond Liquidity

The benefits of a specially designed life insurance policy extend beyond liquidity and tax advantages. This strategic tool offers several key advantages for wealth management, asset protection, and estate planning, including:

  • Asset protection: Life insurance policies are protected from creditors in many jurisdictions, providing a shield for your assets.
  • Estate balancing: Life insurance can equalize inheritance among surviving family members, preventing potential disputes over perceived imbalances in distribution.
  • Estate liquidity: Life insurance policies provide immediate liquidity to handle estate tax liabilities or operational expenses for illiquid assets like family businesses or farms.
  • Estate planning: Life insurance proceeds can provide a tax-free inheritance to safeguard your family’s financial future.
  • Charitable giving: Policies can be structured to facilitate tax-efficient charitable giving.

These advantages underscore the impact a specially designed life insurance policy can have as an integral component of a comprehensive financial strategy. Offering flexibility and security, it serves as a potent wealth management instrument that equips high-income professionals to adeptly steer through their unique financial intricacies, bolstering their financial resilience, and instilling confidence in their fiscal future.

Cost and Cash Value Accumulation

A common pushback against using life insurance as an accumulation vehicle is the perception that it is expensive and takes a long time to accumulate substantial cash value. However, the life insurance policy we’re discussing is not your typical off-the-shelf policy.

These specially designed policies are structured with a focus on building high cash values. Much of your premium goes toward rapidly building up the cash value, rather than paying for the death benefit.

While there is an undeniable cost associated with a specially designed life insurance policy, it’s crucial to consider this expense in contrast to potential tax liabilities. Without proper planning, taxes can take a significant bite out of your investment growth.

Retirement account distributions are generally taxed as ordinary income, whereas the cash value growth within a life insurance policy is tax-deferred, and policy loans taken out are typically tax-free.

In many cases, the cost of a specially designed life insurance policy could be a mere fraction of what the tax liabilities may be on investment growth over time. The true cost of these policies becomes apparent when considering the full financial picture, including current and future tax burdens, access to cash, and long-term wealth accumulation.

A Strategic Approach to Wealth Management

A specially designed life insurance policy offers a unique tool to tackle the double-edged sword of tax burdens and liquidity needs that plague high-income professionals. It’s a powerful option to consider when exploring avenues for efficient wealth management, especially when the alternatives—potential tax liabilities, lack of liquidity—are considered.

However, a specially designed life insurance policy is not a catch-all solution, but rather a tool within the context of a comprehensive wealth management plan. Just as everyone’s financial situation and goals are unique, so, too, should be the approach to financial planning.

As high-income professionals, you are confronted with distinct financial challenges. However, armed with the right strategy, these challenges can be transformed into opportunities that pave the way toward greater financial independence and tranquility.

Financial planning is a collaborative endeavor rather than a solitary pursuit. A partnership with an experienced adviser offers not only guidance but also reassurance, ensuring that your strategies are optimized, your approach is personalized, and your financial trajectory aligns seamlessly with your unique needs and aspirations.

To learn more about these policy designs and whether this is something to consider, visit BUILDbanking.com.

BUILD Banking™️ is a DBA of Skrobonja Insurance Services, LLC. Benefits and guarantees are based on the claims paying ability of the insurance company. Not FDIC insured. Results may vary.

Securities offered only by duly registered individuals through Madison Avenue Securities, LLC. (MAS), Member FINRA & SIPC. Advisory services offered only by duly registered individuals through Skrobonja Wealth Management (SWM), a registered investment advisor. Tax services offered only through Skrobonja Tax Consulting. MAS does not offer Build Banking or tax advice. Skrobonja Financial Group, LLC, Skrobonja Wealth Management, LLC, Skrobonja Insurance Services, LLC, Skrobonja Tax Consulting, and Build Banking are not affiliated with MAS.

Skrobonja Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Skrobonja Wealth Management, LLC and its representatives are properly licensed or exempt from licensure.

The firm is a registered investment adviser with the state of Missouri and may only transact business with residents of those states, or residents of other states where otherwise legally permitted subject to exemption or exclusion from registration requirements. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.

The appearances in ANBLE were obtained through a PR program. The columnist is not affiliated with, nor endorsed by ANBLE. ANBLE did not compensate the columnist in any way.