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We look at cash value life insurance from double or triple rate mutual owned insurance company as a hedge to a clients port. I like this better than muni right now with interest rate rising. There is multiple reasons we do this strategy with High net worth families. The hedge never to lose value to offset downturns in Market is the best one, but it hard to find 5-6% tax free returns outside of life insurance.
Agree with first replier, specifically using a whole life survivorship policy with a dividend rider allowing for additional deposits as allowable. By using 2nd to die policy, it would minimize insurance costs. 5%+ year over year returns and accessibility to funds on tax favored basis. Bonus is the legacy it potentially leaves family. If insurance needed for income replacement, would then use individual policy(ies). This also gives investment protection as well, can show that it would lower risk and increase return of total portfolio.
I think the cash value policy is a great idea. I’m a fan of the Universal Life personally, especially if you’re going to be putting $20K+ per year in it. It allows the most flexibility and it allows more $ per dollar of death benefit to be put it in, therefore allowing you to overfund it more, which makes cash value perform even better. And other posters are correct, it’s a tremendous tool for “sequence of returns risks”, which means it’s a great tool to use when markets are down. Cash balance plan does not give you that.....
This is not to be construed as legally-binding tax advice, but a rule of thumb is to wait 12 months, or at the very least, wait until the next calendar year and convert previous year contributions into Roth while making new non-deductible trad IRA contribution. Of course, the IRS could challenge this or revoke the ability to convert traditional assets into Roth assets, so that’s always a possibility.
That's sounds like a generic response, the question is what else are you putting your money in?
My age (32) kept coming up as a negative with cash balance plans in the materials I read. I do have a couple partners that are 35 and 39. We and a few employees.
Cash Value Life Insurance.
That’s a good option LPA, inc 1 - by doing a ddp in oil and gas but be very careful whom u do it with the marketing cost can be extremely high unless you work with the driller directly. Our firm has a little edge on this concept because we are based in the largest oil reserve in the country. So it’s easy to find good deals. The advantage for ddp is the write off. U can deduct up to 500k a year using the 179 deduction and depletion write offs. But again if u come up a dry hole then u lose everything. Very risky but I have and manage guys that have made 100MM using this concept. This is not a suggestion just a conversation.
What dpp's are you recommending to clients? What do you mean by the dpp's let you convert qualified to Roth?
a dpp is a direct
Sorry typo on previous message... a dpp is a direct Participation program in oil and gas. Meaning you own the oil well directly. Therefore you can write off the everything up to 92% of the cost of the well in the first year if it’s under 500k. There is no Roth conversion. Not sure where you got that from my text.
Properly designed IUL's have lower targets than VUL. Commission rate is the same. IUL's avg 6% to 6.5% long term without market risk. Great alternative to muni bonds. We use new construction apartment project for conversions. Agree with carefully doing due diligence on oil and gas. Land lease project are a little less risk because you are not involved with the drilling aspect.
In LPA's comment
Yeah land lease u can’t deduct anything. This would be royalties on land I.e. owning mineral rights, this would be similar to owning real estate. Long amortization schedule 30 yrs+ and even longer wait for returns. Pay off can be big, but u will need millions to be a player in that market.
IUL sucks rising cost of insurance, credit happens once a year on policy annual date, tied to market performance but does not capture market growth, most IULs are capped and the ceiling usually changes according the company discretion. I wouldn’t recommend IULs to my worst enemy.. terrible contracts and one day they will be the next action lawsuits
Can you dumb down the DPP investment? What is a good initial investment amount or can you make monthly contributions to it or is it more geared for a lump sum? How to do you go about finding good ones?
Premium financing is the worse idea in the industry right now. Why in the hell would I allow a bank to control my life insurance, and my investments. Premium financing is yearly renewable by the bank. If the bank changes its mind or you develop a higher debt to income ratio the bank can and will not renew the note then your screwed. Plus why the hell would you use this when rates are rising. 10 years from now when the interest rate is twice the IUL rate which is another reason not to do it, again you will be screwed. This year alone I have taken so many accounts away from banks and bank advisors for pitch this convoluted horrible idea product.
How does the AMT affect the DPP's?
So what are your goals for your extra cash? You didn’t say anything in your opening post about what you want your money to do for you, for your family or for society. I’d start there, then make some recommendations and build upon what you have already in place.
With the backdoor Roth strategy, be careful to not violate the step transaction doctrine by moving the assets from a non-deductible traditional IRA into a Roth too quickly. And be careful, if you haven’t already, to not mix deductible and non-deductible contributions in the same IRA or converting to the Roth will likely have tax consequences.
Ameriprise 1- how many days/months would you wait ?
So 11/1/17 I convert my $5500 i put in during 2016, and also put a new $5500 as a non deductible trad Ira contribution ? Then in 2018, I convert the 11/1/17 contribution ? That's how you would set it up ?