Protecting Your Retirement Funds From Tax w/Jake Jacobs
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Episode Description
Welcome to the Freedom Point Real Estate podcast! In today's episode, Jeremy Dyer is joined by an old friend, Jake Jacobs, who shares what he's learned through his battle with throat cancer, how indexed universal life insurance and the laser fund approach generally work, and more.
Jake Jacobs is a former professional and division 1 college football player. For 21 years he did sales for a Fortune 100 company selling 1.2-1.7 million per year. In 2019, he was diagnosed with stage 4 throat cancer and had a tumor on his vocal cord. After 5 surgeries, 35 rounds of radiation, and numerous chemo treatments, he ended up losing his voice box and now breathes through a stoma and speaks with a prosthetic. His 3 year cancer battle changed his perspective on life, and he hopes to help others through partnership. Jake currently represents a firm that specializes in retirement vehicles that are focussed on tax minimization.
CONNECT WITH JAKE JACOBS!
Website: https://www.wellnesshcadvantage.com/
LinkedIn: https://www.linkedin.com/in/jake-jacobs-8173643a/
Email: jake.jacobs@wellnesshcadvantage.com
CONNECT WITH JEREMY DYER!
Website: https://startingpointcapital.com/
Instagram: https://www.instagram.com/startingpointcapital/
LinkedIn: https://www.linkedin.com/in/jeremydyer
Facebook: https://www.facebook.com/startingpointcapital
Book a Call! https://calendly.com/startingpointcapital/discuss-investing-with-jeremy-dyer?month=2023-12
Summary
Tip #1: Understand the Downsides of Traditional 401(k) Plans
"Every time I took money out of my 401(k), I was penalized and taxed heavily." 401(k) plans may seem appealing due to their tax-deferred status, but penalties and taxes upon withdrawal can significantly reduce their effectiveness. Additionally, inflation and lack of tax deductions in retirement can erode the value of these funds, making them less reliable as a sole retirement strategy.
Tip #2: Explore Alternative Retirement Vehicles
"I started looking into other ways to help families avoid what I went through with my 401(k)." After facing financial difficulties due to cancer, Jake Jacobs discovered better ways to secure retirement funds. Exploring options like indexed universal life insurance (IUL) can provide tax advantages and more flexible access to funds.
Tip #3: The Importance of Liquidity in Retirement
"The key part is liquidity—you want access to your money whenever you need it." Retirement funds need to be accessible without significant penalties or restrictions. IULs offer this flexibility, allowing for easy access to funds for various needs, unlike traditional retirement accounts that often come with strict rules and penalties.
Tip #4: Safety and Stability with Indexed Universal Life Insurance
"With an IUL, regardless of what the market does, you are contractually obligated to lose zero." IULs provide a safe investment vehicle with a guaranteed floor, protecting your principal from market downturns. This stability is crucial for retirees who cannot afford significant losses in their retirement savings.
Tip #5: Tax Advantages of IULs
"The IRS codes 101a, 72e, and 7702 allow your money to grow tax-free, be accessed tax-free, and be left tax-free." IULs offer significant tax benefits, making them an attractive option for retirement planning. These benefits can provide a tax-free growth environment and ensure that withdrawals and death benefits are not subject to heavy taxation.
Tip #6: The Concept of Becoming Your Own Bank
"You can take a loan out against your IUL and still gain compound interest on the full amount." Using an IUL, you can borrow against your policy without affecting its growth, effectively becoming your own bank. This allows you to fund other investments or expenses while still earning returns on the total policy value.
Tip #7: Structuring Your IUL Correctly
"The key is in the setup—the swing, not just the clubs." Properly setting up an IUL is crucial to maximizing its benefits. This involves minimizing the cost of insurance and ensuring the structure allows for maximum growth and flexibility.
Tip #8: Comparing IULs to Traditional Investments
"Would you rather pay tax on the seed or the harvest?" Paying taxes upfront on smaller amounts (like with IULs) is often more beneficial than paying taxes on larger sums upon retirement (like with 401(k)s). This strategy ensures more of your money grows tax-free over time.
Tip #9: Using IULs for Various Financial Needs
"The money in an IUL can be used for college, real estate, or any other financial goals." The flexibility of IULs extends beyond retirement, allowing policyholders to fund various financial needs. This makes IULs a versatile tool for comprehensive financial planning.
Tip #10: Seek Professional Guidance
"The correct setup and management of an IUL require professional expertise." Given the complexity of IULs, it's important to work with knowledgeable professionals to ensure they are structured and managed correctly. This ensures you fully benefit from the unique advantages these policies offer.
