3 Ways To Have Tax-Free Income in Retirement
Did you know there's only 3 ways to create tax-free money in retirement?
You could buy municipal bonds. No restrictions on how much you can buy. Muni bonds are generally safer than stocks but there is a risk of default when cities go insolvent and default on debt.
You could fund a Roth IRA (assuming your income isn't too high). According to the 2018 tax rules, you can invest up to $5,500 a year in a Roth IRA; if you are over age 50, you can put an additional $1,000 into a Roth IRA for a total of $6,500.
You can overfund a dividend paying Whole Life policy and borrow against the cash values. Taking loans is a non-taxable event and the death benefit eventually covers the loans. If you're familiar with Jim Harbaugh, former San Francisco 49ers coach now with the University of Michigan, tax-free loans from a policy on his life is part of his compensation plan. See the ESPN article below. Unlike a Roth IRA, Mr. Harbaugh doesn't have to wait until age 59.5 to start taking income and because the policy is a private contract (not a government qualified plan like 401k/IRAs), contributions to the plan can be substantially more than any 401k/IRA imposed limit. There is also no risk of market performance for Mr. Harbaugh because Whole Life policies have guaranteed cash values.
Here's the ESPN article:
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This is great advice.
Thank you and it's more common than you think. Jim Harbough is just one of example but wealthy people have known about it and used it for decades. Walt Disney, JCPenney, President Roosevelt are just a few examples off the top of my head. 401k/IRAs only came about in the late 70s and gained popularity from there as companies decided to do away with costly pension plans. The bull market from 1982 to 1998 also helped the popularity of 401ks, too. But people who retire with 401k/IRA's are discovering the major problems associated with them: no guarantees of income or principal and a lifetime of taxes. Two things that can be avoided with an Infinite Banking designed Whole Life policy.