We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the January 2022 edition. We're sharing the full introduction, and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
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January 2022 – 7 Ideas and Views Newsletter by Van Mueller
THIS IS THE MOST IMPORTANT NEWSLETTER I WILL HAVE EVER WRITTEN!! PLEASE READ IT CAREFULLY AND PLEASE READ IT AT LEAST 10 TIMES.
We are all at a turning point in our careers. Government interference is increasing at extraordinary levels, both to the economy and to our business. Wall Street and the banks are manipulating the economy at alarming levels. The rules are changing at a rapid pace to supposedly protect the consumer, while the secret intent is to provide the government with as much revenue as possible. Please read the following carefully.
“The Department of Labor (DOL) recently updated their Fiduciary Rule to include a new prohibited transaction exemption (PTE) related to certain investments and rollover recommendations. The DOL also expanded its interpretation of the existing 5-part test to determine when an individual is an ERISA fiduciary. The updated rule (including new PTE and the expanded interpretation) became effective on February 16, 2021 with compliance required by January 31. 2022.
Please give thoughtful consideration to why this is being done. Also, please understand that these rules won’t just apply to securities licensed professionals. They will also apply to non-qualified transfers and cash value life insurance, and non-qualified annuities sooner rather than later. Think about this, if the intent was to protect our customers, the American people, wouldn’t restrictions be placed on anything that could lose money? Wouldn’t the government give much more significance to sequence of returns?
If the intent was to protect our customers, the American people, wouldn’t restrictions be placed on anything that could lose money?
Also, there is more and more pressure on commissions. There is more and more pressure to provide advice as a fiduciary, yet you are not allowed to make enough money to support a career or provide services that a fiduciary would provide. We see, literally, everyday fiduciaries who are caught using customers funds or making ridiculous recommendations or not giving consideration to income taxes or guaranteed lifetime income. Being a fiduciary should be a natural course of business. Government makes you look like you have a fiduciary protection when you don’t. The government will never provide real reform. It is easier to go after the low hanging fruit than the entities that provide money for our representatives to run their campaigns. There is scientific, mathematical, economic, and statistical proof.
Ninety seven percent of the insurance and financial professionals in this country make less than $90,000 per year. For the most part they are not overcharging for their services, yet that is who the government makes jump through all the hoops adding extra expenses and time with redundant information to supposedly protect the American Consumer. While this is happening, banks, mutual funds and other financial entities are allowed to put the entire world’s economy in jeopardy trading in derivatives and digital currency, etc. with little or no oversite.
Also, according to the Wage Statistics provided by the Social Security Administration since 1990, in 2020 the latest year statistics are provided, 80 percent of Americans make less than $75,000 per year. 88 percent make less than $100,000 per year. Isn’t it completely understandable that these people who need the most advice cannot afford fees with the cost of everything else in our society rising? Is the government making it easier or harder to provide the important advice that almost 90 percent of Americans need?
Is the government making it easier or harder to provide the important advice that almost 90 percent of Americans need?
2022 will be a transition year in the history of the world. It is the greatest opportunity we as an industry have ever had. We must rise to the occasion and help our customers have financial and retirement success while using the same dollars to provide protection against dying too soon, critical illness and long-term care without wasting any of the money if you don’t need protection.
Why is the government changing RMD’s to age 72 and even possibly to age 75? Why does the government want to reduce rollovers and make it more and more difficult to do? Think about the information I just shared with you. If 90 percent of Americans, make less than $100,000 they remain in the 12 percent marginal tax bracket and less than 9 percent as the effective tax rate. The government cannot collect the revenue it will need in the future if they allow things to proceed as they are. They want the money from IRA’s, 401(k)’s, 403(b)’s and 457 plans to pass to non-spouse beneficiaries who will be taxed at 30 or 40 or even 50 percent, when they inherit. You will be required to prove why you are putting money into a cash value life insurance policy from a qualified account. You must have a better reason than “my company said I should sell more life insurance.” It will be important to explain the tax benefits to the customer. It will be important to share that liquidity or access to the customer’s money will be maintained. It will be important to explain that the death benefit leverage can be used to offset inflation. It will be important to share that the same dollars used to achieve financial and retirement success will also be available for protection and if the protection is never needed, the customer will not have wasted any of their money on protection they didn’t use.
It will be important to share that liquidity or access to the customer’s money will be maintained.
Finally, it will be important to show that your strategy can provide guaranteed income that cannot be outlived. It will NEVER be about who has the best policy in the future because there is no way to quantify that declaration. Everything will revolve around who has the best strategy to use our customers’ money in the most effective and efficient way possible. That is the information this newsletter provides!
WHAT IS THE ULTIMATE GOAL OF THIS NEWSLETTER?
Isn’t it to provide you with the skills and techniques to help 2022 be the best year you have ever had in the business and ultimately to help you build the career of your dreams? If you could accomplish this in weeks or months rather than years, would you be willing to make the investment in yourself to learn the skills this newsletter teaches? Would you be willing to practice those skills until they became instinctive? Do you realize the only thing holding you back from the success or increased success you wish to have is your willingness to LEARN and PRACTICE those skills.
As I explained above, this information is not just for agents and advisors trying to become successful. This information is valuable to those who already experience some level of success, even as high as MDRT’s Top of the Table. The information in the newsletter shares techniques that significantly shorten your sales cycle so you can increase your production in the same amount of time or maintain your production in much less time allowing you a significant increase in the amount of time to do other things.
These are all learned skills. You cannot learn them practicing on yourself. You must practice on people. It is always challenging and uncomfortable initially, however the more you practice the more comfortable you will become and the more comfortable you will appear to your customers. How much you practice defines how good you want to be.
HOW GOOD DO YOU WANT TO BE AND WHEN DO YOU WANT TO GET STARTED? Today must be the answer.
How good do you want to be and when do you want to get started? Today must be the answer.
Every January I break the newsletter into four parts. First, why is it vital for you to learn these skills? Second, what tools will be necessary for you to advocate for the American people? Third, how can you “find the money” to build successful financial and retirement strategies for our customers. And, finally, the seven sales ideas we use to create wonderful discussions and conversations with our prospects and clients.
FIRST, why must we develop these skills?
Mathematically, it is no longer possible for government to fix the mess they have made of our economy for the American people. However, it is still mathematically possible for individual Americans to have financial and retirement success and to build the financial “freedom” they dream about. But they must take action and they must begin soon.
Federal income taxes will increase from $4 trillion currently to $4.4 trillion by 2029. https://www.usdebtclock.org predicts that our debt will be more than $81 trillion by 2029. That is still in this decade. Debt is increasing at all levels of government. In addition to the debt of our federal government, the states, cities, counties, townships and municipalities face crushing debt. Demographically, won’t government require more money for all our retirees who are living longer than they have ever lived?
With this knowledge, the government continues to encourage Americans to take a tax deduction now on a small amount of contribution when taxes are historically low, so Americans can build a fully taxable, much greater amount of money in the future that the government can tax at any level they require. Does that seem like its beneficial to our customers?
Ask that customer these questions. “Do you think taxes will be higher in the future? Do you want to pay those taxes? If you could gain control of how much tax you pay rather than allowing the government to be in control of how much tax you pay, would you want to develop a strategy that keeps you in control and when would you like to get started: Before or after the government changes the rules?”
If you could gain control of how much tax you pay rather than allowing the government to be in control of how much tax you pay, would you want to develop a strategy that keeps you in control and when would you like to get started: Before or after the government changes the rules?
Our country now has an additional “stealth tax” called inflation. A better description of inflation would be “the reduced purchasing power of our money.” Our government is currently planning on increasing the money supply by 175 percent between now and 2029. What do you think that will do to the purchasing power of our money? Isn’t that a tax? Inflation is even more insidious than income tax increases. Increased taxes only affect 15 to 20 percent of Americans. Inflation impacts 100 percent of Americans. How do we know for sure the stealth tax (inflation) is coming? Mathematically, after raising taxes and lowering benefits, government will have to print enormous amounts of new money. It is the only way the government can provide the promised benefits and services.
Simultaneously, people are now more in debt than any time in history. Please remember what we have all learned together; “Debt signals the need for life insurance.” If our customers claim they can’t afford the premium, respectfully ask them how the survivors will be able to afford the problem. Do our customers think in an organized way when it comes to issues like these Shouldn’t we always ask if our customers realize the predicament they are creating for personal and business survivors and loved ones?
SECOND, what tools can be used to inspire our customers to take action?
Here are a few to get you started.
1. https://www.usdebtclock.org
It only costs $1.99 to upgrade this application. It will extend the information to 2029 and will provide additional information the free application does not.
2. https://www.truthinaccounting.org
Under the heading “NEWS”, you can subscribe to Bill’s Blog for free. He will provide daily insight into national, state and local tax and pension information. It’s FREE!!
3. Wage statistics for 2016
When you “Google” those words you will be taken to an amazing chart presented annually by Social Security that shows what Americans earn. The information is available from 1990 to 2020. In 2020, 88 percent of Americans made less than $100,000. Will we really be able to collect more taxes from these people? So, how will we get more revenue? It won’t be with an income tax. We Will All Pay Stealth Tax.
In 2020, 88 percent of Americans made less than $100,000. Will we really be able to collect more taxes from these people?
4. Life of tax: What Americans will Pay in taxes over a lifetime.
If you “Google” this, you will find amazing information for each state showing the income tax liability Americans pay over their lifetimes.
THIRD, How Do You “Find the Money” To Build Successful Strategies For Our Customers?
In order to be successful in our business, you must have a basic understanding of income tax law. If you wish to increase your production, I repeat; you must have a basic understanding of income tax law. An important tool will be found at https://www.irs.gov. Please go to this website and find the header “Forms and Instructions.” Please print the entire 1040 instructions booklet. It is 114 pages. These will be for 2020 instructions. The 2021 instructions will not be available until the end of January. Read through it a few times so you can get a feel for the information. In the 2020 version pay particular attention to the four pages I will highlight below. Understanding these four pages will change your life and your customers’ lives. You must know these four pages.
Page 31 – How Much of My Social Security is Taxable
Page 33 – Standard Deduction for People Over and Under Age 65
Page 109 – Income and Outlays for our Government
Page 110 – Tax Tables
The page numbers will change when the 2021 instructions come out. The forms will be adjusted to reflect 2021 filing. Remember to print out the entire instructions so your customers will understand you did not edit anything. This will show the information comes from the government and not from you.
Next month I will update all the new numbers to reflect a 2021 tax filing.
Before I begin, a caveat: These are a few examples to be used as a guide. There are many permutations of the information being provided. For example, these cases do not include state income taxes. Some states do not tax Social Security. I use all the examples with Social Security so you can easily explain why even having 85 percent of your Social Security is preferable to waiting and having 40 or 50 percent of your 401(k), IRA, 403(b) or 457 plans taxable after you have built it into a large amount of money.
There are unlimited examples of how to use this information. These examples try to cover as many bases as possible to expand your creativity when it comes to providing quality answers for all the challenges our prospects and client’s will face in the future. This information in my newsletter shows you how to use the “progressive” nature of our tax laws to turn marginal tax rates into lower “effective” tax rates. Even if the rates increase in the future, the law will most likely remain a progressive tax law. This is how you build a foundation for the rest of your career.
Let’s get started with the 2022 presentation.
Married Couple Over Age 65
(Assumes $32,000 of Annual Social Security:
This is the New Average Social Security)
1. Social Security: $32,000
Standard Deduction in 2022: $28,700
Total Income: $60,700
How Much is Taxable of the $60,700? $6,350
A married couple could withdraw $28,700 of fully taxable money in addition to their $32,000 of Social Security and only pay taxes on $6,350, which would be $635.
$28,700 = $0
This is the taxable Social Security $6,350 = $635
Total = $635
This couple could withdraw $60,700 of Social Security and fully taxable money every year for 10 years for a total of $607,000 or $60,700 every year for 20 years for a total of $1,214,000 and pay only $6,350 in ten years or $12,700 in 20 years in federal income taxes. That is about a one percent effective tax rate.
Ask your customer if this strategy would be beneficial for them and their family or business!
Additionally, the average life expectancy for a couple over age 65 is 20 years. Many live 25 or 30 years. Wouldn’t elimination of the future income tax liability make their money last longer without adding additional risk?
You will probably use the example in number one the most. Let’s discuss the opportunities!
The number you should be paying attention to in this example is $60,700. Simply stated, if any of your customers have less than $60,700 of gross income that included their Social Security, they could be withdrawing the difference and paying the income taxes now at THEIR effective tax rate. If a client has $50,000 of income including their Social Security, wouldn’t it be beneficial to withdraw another $10,700 of fully taxable income if it would only cost them $635 in taxes to eliminate the taxes on that money forever? In 10 years removing the income tax liability on 10 years of $10,700 of $107,000 would be $6,350. In 20 years, it would cost them $12,700 to eliminate the tax liability on $214,000 of fully taxable money. Ask your customer, why wouldn’t everyone do that?
Now let’s say we have a retired couple living on $32,000 of Social Security receiving a required minimum distribution of $11,000. That would be the approximate RMD on $300,000 of qualified money. Shouldn’t you ask them why they aren’t taking another $17,700 from their qualified money if it would only cost them $635 to eliminate the income tax liability on the money forever? If you reallocated that $17,700 every year into a cash value life insurance policy, after 10 years wouldn’t you have converted $177,000 of forever taxed money into $177,000 of never taxed money? Wouldn’t that $177,000 of never taxed, (cash value) provide a leveraged death benefit of $300,000 or $400,000 and the ability to cover long term care without wasting any premiums or offsetting inflation without harming the intended inheritance? Ask your customer if they understand how brilliant they are. Haven’t they figured out a way to eliminate taxes on $177,000 for only $6,350 and when they die, won’t the death benefit reimburse their family the $6,350 and then some? So, they got all the fully taxable money out of their 401(k) or IRA without paying one cent of the tax out of their own pocket. Isn’t that an amazing strategy Mr. & Mrs. Customer?
Ask your customer to imagine that they have never met you. Then assume one of them requires long term care for the last two years of their life. Did you notice I didn’t say nursing home? Ask your customer if there are really any good nursing homes. Would you put someone you really love in a nursing home if you didn’t have to? Wouldn’t you prefer to be cared for in your own home if it was possible? If the care at home cost $80,000 annually there is literally nothing left of the $177,000 in an IRA or 401(k) after two years of care. If there is $177,000 of cash value in a cash value life insurance policy that has only a $300,000 face amount, couldn’t our customer use $150,000 of the cash value over the two years of care and then have the asset replenished at death by the life insurance face amount? Ask them if they know anything else in the world that can do what you just described. Then say, I have a surprise for you. If you don’t need the cash value while you are alive, then you didn’t waste one cent of premium on long term care coverage that you didn’t use. Your family, business or charity will receive $300,000 income tax free. The exact same scenario applies to inflation. If the customer needs to use $150,000 of the cash value to maintain their standard of living, the original amount is replenished by the leveraged death benefit. Ask them again: Do you know anything in the world that can do what I just described?
Remember, if they live on their Social Security using the average of $32,000, couldn’t they withdraw $28,700 per year of fully taxable income and ONLY pay $635 in taxes? If they live on $55,000 per year, they could use the $5,700 difference between the $60,700 and the $55,000 to buy life insurance which would help offset any income tax liability on qualified money. The total income tax liability in example number one is $635. Shouldn’t everyone of our customers know this information?
2. Social Security: $32,000
Standard Deduction in 2022: $28,700
10% tax bracket: $20,550
Total Income: $81,250
How Much is Taxable of the $81,250? $73,313
A married couple could withdraw $49,250 of fully taxable money in addition to their $32,000 of Social Security and only pay taxes on $73,313, which would be $4,943.
$28,700 = $0
$20,550 = $2,055
$24,063 = $2,888
Total = $4,943
This couple can withdraw $81,250 of Social Security and fully taxable money every year for 10 years for a total of $812,500 and only pay $49,430 in income taxes. They could take out $81,250 per year for 20 years for a total of $1,625,000 and only pay $98,860 ($4,943 x 20 years) in federal income taxes over 20 years. That is 6.1 percent effective tax rate.
Number 2 is just an extension of idea number 1, however, I have added the entire 10 percent tax bracket to the withdrawal. The 10 percent tax bracket for 2022 is $20,550. If you add the $32,000 of Social Security and the $28,700 standard deduction and the entire 10 percent tax bracket, they add up to $81,250. Using the Social Security chart in the 1020 instructions, we can calculate that only $24,063 of the Social Security is income taxable in this example. So, even though we have a gross income of $81,250, only $73,313 is subject to income tax. That liability is $4,493.
If we divide $4,943 by the $81,250 gross income, we find the effective tax rate is 6.1 percent. Ask your customer this question: If they could eliminate the income tax liability forever on an additional $20,550 of fully taxable money for 6 percent per year, would they do it? The vast majority of your customers will in a heartbeat, if they knew about it. The reallocated money can be used for financial success and things like long term care and out of pocket healthcare expenses. It can also provide tax free supplemental income later in life. The money can be used as an inflation hedge coupled with cash value life insurance. Isn’t that a more effective use of the money rather than leaving it in an IRA or 401(k)?
3. Social Security: $32,000
Standard Deduction in 2022: $28,700
10% tax bracket: $20,550
12% tax bracket: $63,000
Total Income: $144,250
How Much is Taxable of the $144,250? $139,450
A married couple could withdraw $112,250 of fully taxable money in addition to their $32,000 of Social Security and only pay taxes on $139,450, which would be $15,599.
$28,700 = $0
$20,550 = $2,055
$63,000 = $7,560
$27,200 = $5,984
Total = $15,599
This couple could withdraw $144,250 of Social Security and fully taxable money every year for 10 years for a total of $1,442,500 and pay only $155,990 in federal income taxes. If they withdrew $144,250 for 20 years, they could withdraw a total of $2,885,000. They would only pay $311,980 ($15,599 x 20 years) in federal income taxes over 20 years. That is an effective tax rate of 10.8 percent.
Using the information in number 3 is how you begin to write really large cases. That is why I share so much information in the newsletters about how much revenue the government will require in the future. The government is setting up non-spouse beneficiaries to pay huge taxes when they inherit these accounts. Using that information, ask your customer if they are building a legacy for the government and the Internal Revenue Service or for their family? Applying these STRATEGIES helps to begin a process of income tax reduction and reallocation of those funds to a more effective and efficient use. In example 3 we are using the entire standard deduction. We are also using the entire 10 and 12 percent income tax brackets. That amount with Social Security of $32,000 added equals $144,250. Because only 85 percent of Social Security can be taxable only $139,450 of the $144,250 is income taxable.
Think of this. A couple requires $70,000 to live comfortably in retirement. They could withdraw a total of $144,250. The income tax is $15,599. Add that to the $70,000 they need to live on and subtract it from the $144,250. That would leave $58,251 that could be allocated to a cash value life insurance policy or an annuity if they are uninsurable. The effective tax rate is 10.8 percent. Ask this question: If you could eliminate the income tax liability on $144,250 for less than 11 percent while you were alive, would you do it? Or, if you wait until you and your spouse die, would you prefer that your children pay 30, 40 or even 50 percent tax to inherit your IRA, 401(k), 403(b) or 457 plans? These examples can be very valuable for someone with $300,000 to $1,000,000 in qualified money.
4. Social Security: $32,000
Standard Deduction in 2022: $28,700
10% tax bracket: $20,550
12% tax bracket: $63,000
22% tax bracket: $94,600
Total Income: $238,850
How Much is Taxable of the $238,850? $234,050
A married couple could withdraw $286,850 of fully taxable money in addition to their $32,000 of Social Security and only pay taxes on $234,050, which would be $36,955.
$28,700 = $0
$20,550 = $2,055
$63,000 = $7,560
$94,600 = $20,812
$27,200 = $6,528
Total = $36,955
This couple can withdraw $238,850 of Social Security and fully taxable money every year for 10 years for a total of $2,388,500 and pay only $369,550 of federal income tax. Over a 20-year period this couple could withdraw $4,777,000 and pay only $739,100 (36,955 x 20 years) in federal income taxes over 20 years. That is an effective tax rate of 15.47 percent.
If you understand example 4 and example 5 coming up, you can have amazing conversations with customers who make large incomes and have huge amounts of qualified money. Essentially, the conversation stays the same. We are converting marginal tax rates into palatable effective tax rates. Now we are using the entire 22 percent income tax bracket, which is another $94,600. If you add Social Security, the standard deduction and the 10, 12 and 22 percent income tax brackets, you could withdraw $238,850. Only $234,050 would be income taxable because 15 percent of your Social Security is not taxable. The total federal income tax is $36,955. If we divide $36,955 by the gross income of $238,850 the effective tax rate is 15.47 percent.
If my customer needs $100,000 to live on and pays $36,955 in federal income tax, that $136,955 subtracted from the gross income of $238,850 leaves $101,895 that can be reallocated to something more effective and efficient while permanently eliminating the tax on that $101,895 forever. The cost was only 15.47 percent. Instead of waiting until the husband and wife die and having the children pay 30, 40 or even 50 percent to inherit this money, why wouldn't everyone use the strategy I stated above? Why aren't we having conversations like these with EVERYONE who has qualified money? Are you beginning to realize that even people who have money do not understand math and do not understand or recognize the opportunity? Shouldn't we ask them?
5. Social Security: $32,000
Standard Deduction in 2022: $28,700
10% tax bracket: $20,550
12% tax bracket: $63,000
22% tax bracket: $94,600
24% tax bracket: $161,950
Total Income: $400,800
How Much is Taxable of the $400,800? $369,000
A married couple could withdraw $368,800 of fully taxable money in addition to their $32,000 of Social Security and only pay taxes on $369,000, which would be $77,899.
$28,700 = $0
$20,550 = $2,055
$63,000 = $7,560
$94,600 = $20,812
$161,950 = $38,868
$27,200 = $8,704
Total = $77,899
This couple can withdraw $400,800 of Social Security and fully taxable income every year for 10 years for a total of $4,080.000 and pay only $778,990 in federal income tax. If they withdrew $400,800 for 20 years, they would withdraw $8,016,000. They would only pay $1,557,980 (77,899 x 20 years) in federal income taxes over 20 years. That is a 19.43 percent effective tax rate.
Example 5 uses the entire 24 percent income tax bracket. That bracket taxes $161,950 of income taxed at 24 percent. The MARGINAL tax rate for this transaction would be 24 percent.
If we withdrew the $32,000 of Social Security, the standard deduction and the 10, 12, 22 and 24 percent income tax brackets we would withdraw $400,800. The income tax on that withdrawal is $77,899. If our customer needs $150,000 per year to live on and we add the $77,899 of taxes that must be paid, it leaves $172,901 from the $400,800 that can be reallocated at the effective tax rate of 19.43 percent. Think about this; if you reallocate that $172,901 annually to a cash value life insurance policy and the death benefit is more than the $1,557,980, they paid in taxes while alive, they have effectively paid all the income taxes without one cent of the money coming out of their own pocket. What a brilliant strategy they are undertaking. Tell your customers how brilliant they are. Ask your customers if it would be worthwhile to eliminate, forever, taxes on millions of dollars at less than 20 percent or should they wait until they die and let the government take 30 to 50 percent of the money from their children? Most of our customers are astonished to discover something like this is possible.
Why do I stop at 24 percent? For me, the answer is that the effective tax rate remains under 20 percent. It minimizes the rate below anything they thought they would ever pay.
Additionally, I always ask grandmas and grandpas what their children and grandchildren will do when they inherit the money. Will they take advantage of the 10 year stretch provision to reduce the income tax on their inheritance or will they take the money as quickly as possible without regard for the income tax liability even if they lose 40 or 50 percent to taxes? Grandma and grandpa ALWAYS say their children would take the money. Ask grandma and grandpa; what if you could reduce or eliminate the income tax liability while you are alive, without giving up control of the money, in order to preserve the majority of this money for your family, would you do it? More often than not they are interested. They don't wish to see what they have worked their whole life for being decimated by income taxes after they die.
Numbers 6, 7, 8, 9 and 10 are a summary of the information I have shared with you thus far. Learning to effectively use this information will become a real game changer for your career. Americans are astonished to discover they still have an opportunity to manage their income tax liability on qualified money and gains from other investments such as non-qualified annuities. What do you think they think about on agent or advisor who brings them these strategies? WOW!
6.
#1. Pay only $12,700 to eliminate taxes on $1,214,000 over 20 years. The effective tax rate is around one percent.
#2. Pay only $98,860 to eliminate taxes on $1,625,000 over 20 years. The effective tax rate is 6.1 percent.
#3. Pay only $311,980 to eliminate taxes on $2,885,000 over 20 years. The effective tax rate is 10.8 percent.
#4. Pay only $739,100 to eliminate taxes on $4,777,000 over 20 years. The effective tax rate is 15.47 percent.
#5. Pay only $1,557,980 to eliminate taxes on $8,016,000 over 20 years. The effective tax rate is 19.43 percent.
7. The magic of the progressive tax law is that the client can control their income tax liability during a period of historically low tax rates. If our customers wait until they die, non-spouse beneficiary’s income tax liability could easily increase to 30 to 50 percent. Why? Because you have transferred the power of control over to the Internal Revenue Service.
8. At each of the above income levels you can reallocate “forever taxed” money into “never taxed” products like annual premium cash value life insurance, modified endowment contracts (MECs) or preferentially taxed products like annuities if our customer is uninsurable. Also, if uninsurable, the money can be converted to Roth IRA’s. You are reallocating the money after it has been withdrawn and the taxes have been paid on the withdrawals.
9. This strategy is used to reduce or eliminate taxes on IRA, 401(k), 403(b) and 457 withdrawals. This can also be used to eliminate deferred gains on existing non-qualified annuities. It can be used to eliminate capital gains taxes for people in the 0%, 10% and 12% tax brackets. Please remember The Rule of 112-12. If a married couple over age 65 have less than $112,250 of taxable income they are in the 12 percent ordinary income tax bracket. That puts them in the 0 percent long term capital gains tax bracket. This is a real opportunity to access capital gains in stocks, bonds, mutual funds and real estate. We are nearing the end of a bull market. Wouldn’t your customers be interested in the rule of 112-12?
10. Life Insurance and Annuities Also Feature These Benefits:
A. No Probate (with named beneficiaries)
B. Incontestable and Private
C. Control from the grave
D. Creditor and predator protection
E. Medicaid versatility
Here is the same information, however my customer is single. This is an opportunity to move large amounts of inefficient and ineffective qualified money to better allocations with the taxes reduced or eliminated.
Single Over Age 65
(Assumes $19,000 of Annual Social Security:
This is the Average Social Security paid)
1. Social Security: $19,000
Standard Deduction in 2022: $14,700
Total Income: $33,700
How Much is Taxable of the $33,700? $0
A single person couple could withdraw $14,700 of fully taxable money in addition to their $19,000 of Social Security and pay no taxes. None of this person’s Social Security would be taxable in this example. This person could withdraw $33,700 of Social Security and fully taxable money every year for 20 years for a total of $674,000 and pay no federal tax: None!
Let’s say the client lives on $31,700 per year. You could show them that they could withdraw another $2,000 per year of fully taxable money and pay no income tax. What could you do with that additional $2,000 per year? Of course, a cash value life insurance program.
2. Social Security: $19,000
Standard Deduction in 2022: $14,700
10% tax bracket: $10,275
Total Income: $43,975
How Much is Taxable of the $43,975? $29,879
A person could withdraw $24,975 of fully taxable money in addition to their $19,000 of Social Security and only pay taxes on $29,875, which would be $1,615.98.
$14,700 = $0
$10,275 = $1,028
$9,904 = $588
Total = $1,616
This person could withdraw $43,975 of Social Security and fully taxable money every year for 20 years for a total of $879,500 and only pay $32,320 ($1,616 x 20 years) in federal income taxes over 20 years. That is 3.68 percent effective tax rate.
3. Social Security: $19,000
Standard Deduction in 2022: $14,700
10% tax bracket: $10,275
12% tax bracket: $31,500
Total Income: $75,475
How Much is Taxable of the $75,475? $72,625
This person could withdraw $56,475 of fully taxable money in addition to their $19,000 of Social Security and only pay taxes on $72,625, which would be $8,361.
$14,700 = $0
$10,275 = $1,028
$31,500 = $3,780
$16,150 = $3,553
Total = $8,361
This person could withdraw $75,475 of Social Security and fully taxable money every year for 20 years for a total of $1,509,500 and only pay $167,220 ($8,361 x 20 years) in federal income taxes over 20 years. That is an 11.08 percent effective tax rate.
4. Social Security: $19,000
Standard Deduction in 2022: $14,700
10% tax bracket: $10,275
12% tax bracket: $31,500
22% tax bracket: $47,300
Total Income: $122,775
How Much is Taxable of the $122,775? $119,925
This person could withdraw $103,775 of fully taxable money in addition to their $19,000 of Social Security and only pay taxes on $119,925, which would be $19,090.
$14,700 = $0
$10,275 = $1,028
$31,500 = $3,780
$47,300 = $10,406
$16,150 = $3,826
Total = $19,090
This person could withdraw $122,775 of Social Security and fully taxable money every year for 20 years for a total of $2,455,500. They would only pay $381,800 ($19,090 x 20 years) in federal income taxes over 20 years. That is a 15.55 effective tax rate.
5. Social Security: $19,000
Standard Deduction in 2022: $14,700
10% tax bracket: $10,275
12% tax bracket: $31,500
22% tax bracket: $47,300
24% tax bracket: $80,975
Total Income: $203,750
How Much is Taxable of the $203,750? $200,900
This person could withdraw $184,750 of fully taxable money in addition to their $19,000 of Social Security and only pay taxes on $200,900, which would be $39,816.
$14,700 = $0
$10,275 = $1,028
$31,500 = $3,780
$47,300 = $10,406
$80,975 = $19,434
$16,150 = $5,168
Total = $39,816
This person could withdraw $203,750 of Social Security and fully taxable money every year for 20 years for a total of $4,075,000. They would only pay $796,320 ($398,816 x 20 years) in federal income taxes over 20 years. That is a 19.54 percent effective tax rate.
Ask every one of your customers this question: “If you could eliminate taxes on huge amounts of money for tax rates of 20 percent or less, WOULD YOU? Do you want to be in control of the taxes you pay, or do you want to leave the control to the Internal Revenue Service and the government?” Americans need to be made aware that opportunities and strategies like these are available to them.
If I were a new or experienced agent and advisor, I would read this information countless times until the discussion of its benefits become second nature to me. I would want to be so well-versed with this information that it would become instinctive. I would be able to start a conversation with them by asking them a few questions. When a prospect or client goes through a process of discovery with this information, they feel like they have discovered something no one else knows. It is exciting to them. It inspires our customers to take action!
I believe the January newsletter can be the foundation for a successful career. If you use the sales presentations from the September newsletter along with the narratives provided over the last twelve months for the 40 questions, you have the foundation for a Million Dollar Round Table qualifying career. Please remember, these are learned skills. I LEARNED how to do this. Everyone can learn these skills and succeed at this. How quickly you build success is dependent upon how much you are willing to practice. It could take a month, or it could take 10 years. It is up to you. This is the first day of the rest of your career. The next 10 years will provide opportunities for us as insurance and financial professionals we couldn’t have dreamed of ten years ago. WILL YOU BE READY?
We will have an abbreviated sales idea section this month because of the expanded opening. Here are some articles you can use to strengthen your sales presentations.
Idea #5: You Must Have a Basic Understanding of Income Tax Law
Here is a simple article with 20 tax terms to help you become more comfortable with the information I want you to get from https://www.irs.gov. Your service to customers will improve dramatically the more comfortable you become with this information.
Title: 20 Tax Terms You Need To Know
https://www.forbes.com/ (Forbes, December 1, 2021)
https://www.forbes.com/advisor/taxes/tax-terms-to-know-when-filing-taxes/
Idea #8: How to Answer, "Let me think about it."
I believe you will find this article very helpful in your dealings with customers.
Title: When Someone Says ‘Let Me Think About It’
https://www.fa-mag.com/ (Financial Advisor, December 27, 2021)
https://www.fa-mag.com/news/when-someone-says--let-me-think-about-it-65515.html
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