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Navigating Clients Through 401(k) Taxes with the Help of Tax Neutralizer

Let’s start at the beginning of the 401(k) taxes issue: many people with 401(k) and IRA balances don’t realize that they owe taxes on their accumulations. While everyone who participates in these plans benefits throughout the years by not having to pay taxes on the contributions, and can still come out ahead in the end, the concern lies in the fact that some are not taking these taxes into account when assessing how well prepared they are for retirement.

The most recent Survey of Consumer Finances from the Federal Reserve (in 2016) took working households from ages 55-64 with assets in a 401(k) into account. The divided the group by income levels, found the median 401(k) balances for those households and estimated the tax rate they will face in retirement. This study found that those in the bottom half of the income level are not facing an issue with taxes. However, those earning in the middle face paying around 22% in taxes on their 401(k) assets and the top tier ending up with a tax bill that is almost a third of their assets.

The point of the survey and subsequent research into looming tax bills was primarily to remind those saving for retirement what their retirement assets will actually look like when called upon. While educating your clients on the reality facing their hard-earned 401(k) assets, the goal should not be to ask your clients to change their habits. Contributing to a regular 401(k) can be a part of a valuable retirement strategy.

Instead, advise your client on the tax liabilities of distributions from regular 401(k) plans. Simplicity Life offers a useful tool for this approach in the 401(k) Tax Neutralizer. The 401(k) Tax Neutralizers allows you to easily demonstrate how a properly structured Indexed Universal Life (IUL) policy can help pay for those future tax liabilities by utilizing free loans. With this tool, you will be better equipped to work with a massive amount of people – over 50 million* – that invest in 401(k) plans.

You can become a valuable resource for your clients by showing them the future, potential tax liabilities paired with the potential of the IUL solution. Do your clients realize the tax implications of distributions from regular 401(k) plans? If you would like more information on sharing this information with your clients and getting started with the 401(k) Tax Neutralizer call a dedicated Simplicity Life representative today! 800.921.3100



*401(k) Plan Research, Investment Company Institute

The money in your 401(k) and IRA accounts doesn’t belong entirely to you, Market Watch






The information contained herein is for general information purposes only. Simplicity Life is not to be held responsible for the accuracy of this information. Neither Simplicity Life nor its employees provide tax or legal advice. As with all matters of a tax or legal nature, your clients should consult their own tax or legal counsel for advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax adviser.

The information, statistics, and opinions reported herein are from sources believed to be reliable. However, Simplicity Life and the author of this blog do not guarantee the truth, accuracy, and reliability of any source, fact and/or statistic cited and no do necessarily agree with any opinions expressed by such sources.

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