$350,000 (x2) Are Your Tax-free Retirement Targets

Your first target is to have a $350,000 balance in your 401k, IRAs, and other retirement vehicles that are taxable in retirement.

Any more than this, will put you at risk of NOT being able to achieve a tax-free retirement (which we want to avoid if possible).

Making contributions to your (taxable) retirement accounts (up to a certain level) can even be better than contributing to a Roth IRA, which I talked all about in this video.

Here are the 3 biggest advantages to making contributions to your taxable retirement accounts, while still positioning yourself for a tax-free retirement:

1) Free Money

Most employers offer some sort of matching program where they will match a percentage of what you contribute to your 401k or other retirement plan. This is free money and even though all the money your employer contributes will be *taxable* (more on this in a moment) you should absolutely take advantage of it.

2) Tax-deductions Today

Contributions to 401k’s, traditional IRA’s and other retirements accounts often provide big tax-deductions TODAY — meaning you can take your contribution straight off your taxable income, reducing your tax liability significant THIS YEAR. This can be very valuable if you are a high-income earner right now and is MOST valuable if you are in the highest tax bracket right now. So, you definitely want to utilize this vehicle for the tax-deduction now.

3) Tax-deferred Growth

Money inside of your retirement accounts grows tax-deferred (meaning you don’t owe taxes on the growth every year). This allows you to push your tax-liability out until retirement, allowing you to accumulate money much more efficiently and effectively.

Now remember, all the money that goes into these retirement accounts is TAXABLE when you start taking it out….

BUT….

There’s a way to ensure that it is NOT taxable.

I’ve crunched the numbers, as have many other experts, and the optimal balance to have in your taxable retirement accounts is about $350,000 at retirement.

Having this amount in your retirement accounts leaves you just enough money that you can utilize your standard deduction (in retirement) to offset your minimum distributions (the money you take out of those accounts) to take virtually all that money out completely tax-free.

Anything above $350,000 needs to be strategically moved over to a tax-free vehicle, like a Roth IRA, or a properly designed cash-value life insurance contract.

That brings me to your second target.

You ALSO want a minimum balance of $350,000 inside of a cash-value life insurance policy at retirement.

This $350,000 of cash-value life insurance will not only aid in moving money from your taxable retirement accounts to a tax-free environment, but it will serve as a tax-free bucket to pull money from in retirement itself.

It will also serve as a volatility buffer allowing you to mathematically take twice as much income out of your retirement portfolio WITHOUT the risk of running out of money in retirement❗️😏

Lastly, your cash-value life insurance can be used to provide cost-free long-term care coverage, preventing your retirement from being liquidated in the likely event of needing some type of long-term care (more on this in a future blog).

Reach out for more info ✅