Can Life Insurance Reduce Taxes?
A client asked me today if they can use their Sacred Account to reduce their taxes and I want to share my answer with you.
First, and as always, in case you’re new here, let’s understand what the Sacred Account is.
It is High-Early-Cash-Value-Dividend-Paying-Whole-Life-Insurance.
I call it the Sacred Account because I don’t want to say High-Early-Cash-Value-Dividend-Paying-Whole-Life-Insurance every time and also because for me, this account actually is Sacred in the sense that I only use it for 4 things!
- Eliminating consumer debt.
- Building reserves.
- Self-financing large purchases.
When I put $1 into my Sacred Account, that entire dollar grows at 3–5% per year on average for the rest of my life, tax-free.
At the same time, I can borrow 70–90% of that dollar at an actual interest cost of about 1–3%, while the entire dollar still grows at 3–5%, tax free.
My money in the Sacred Account is:
- Guaranteed against loss
- Guaranteed to grow
- Protected from taxation
- Protected from creditors
- Protected from lawsuits
- Protected from privacy invasion
- Fully financially allocated and backed
- Insured against insolvency of the company I have my account with
This is why it’s the Sacred Account.
So today I met with a client and delivered a tax plan via my company Tax Kraken and we are going to help this client reduce her taxes this year and every year by about $3,000/yr.
The cost to set this up though is going to be about $5,000 one time.
In other words she is going to invest $5,000 in tax reduction strategies this year and will save $3,000 this year in taxes, a 60% return on investment in year 1, and will continually save $3,000/yr in taxes from here on out. In 5 years, her return on the initial $5,000 she paid us to help with this is going to be 400% cumulative.
Tax Planning is an investment and should be looked at this way.
Now, she asked me if she could pay the $5,000 with her Sacred Account and I told her of course she can!
And it’s actually a great idea!
Here’s how it would work:
- Pay the $5,000 on a cash back credit card. There are cash back cards that will pay 2% back on all purchases. So just by doing this, she will earn $100 additional.
- Take a $5,000 loan against her Sacred Account. Her $5,000 will still be growing at 3–5% tax free on average while she uses it.
- Pay for the tax planning services.
- Obtain the $3,000 tax savings.
- Take the $3,000 saved and pay her Sacred Account back.
- Continue to pay off the remaining $2,000 of her Sacred Account loan.
What she has accomplished by doing it this way is not only a reduction in taxes, but also the $5,000 she invested will keep growing like it never left and she’s also forced herself to increase her savings rate.
The next time someone tells you that life insurance cannot reduce your taxes, I want you to think twice about that statement because it most definitely can when used correctly!
PLUS, the money she puts in the life insurance policy will grow tax free forever.
If you didn’t know you could use life insurance this way, then I want to invite you to grab a free copy of my book The Blueprint to Financial Freedom!
This book goes into strategies using life insurance (aka The Sacred Account) to help you achieve greater financial freedom in life, and is based on the historically successful strategies of the Top 1% of Wealth.
Click here to get your free copy!
Not only is this book life changing, but it actually comes with a Couse Supervisor who will contact you to ensure you finish the book and understand it, plus a free coaching call to help you apply what you’ve learned!
Click here to get your copy!
To Purpose, Wealth & Freedom,
Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on over 45 podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.
Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.
Learn more at www.WealthDynamX.com
(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)