Making The Most of Your Retirement Dollars

Presented By:Jeffrey Cutter, CPA, PFS

Cutter Financial Group, LLC

Seeking A Tax-Free Retirement Educational WorkshopA Discussion of Retirement and Taxes

Questions to Think About

1. Do you think there will be higher taxes in the future? Do you want to wait until they change the tax law or do you want to do something before they change the tax law?

2. Do you think there will be lower benefits in the future? What is going to happen to your family’s standard of living? What is your strategy to replace those lost benefits?

3. If you have higher taxes and lower benefits, what happens to the money supply? The Government prints more! Another word is

inflation! What’s your strategy to address the hidden tax?

4. If we have higher taxes, lower benefits, and inflation, isn’t that going to cause more and more volatility? What if you make a mistake, how about five? How many -40% years can you take? What is your strategy to take advantage of the good volatility and not be hurt by the bad volatility? Do you have one?

Four Questions to Ask Yourself

Health Reform & Insurance

1. 50% of America according to the IRS makes less than 30K

2. 2/3 of America makes less than 50K

3. 80% of America makes less than 72K

4. Top 400 wealthiest people have more money than the bottom 50% of America. 400 out of 155 Million. Redistribution of wealth is taking place

5. Census.gov-Average cost of insurance policy in 2000 was $6K/year; 2010 was $13,800, projected to be $25K-$30K per year by 2020.

6. Census.gov-Average American income was $52,277 in 2000, in 2010 it was $49,800.

Challenges Facing Americans

Social Security & Medicare1.There are no economic assets in the Social Security trust

fund. - Office of Management and Budget

2.The fiscal gap is enormous and indicates that our nation is, quite literally, facing bankruptcy. – Laurence Kotikoff, economist

3.First COLA in 3 years; 1.7%

4.American Acutary’s say to immediately raise qualifying age

1.1925,Social Security created, life expectancy was 62, designed so no one received benefits

2.1965, Medicare created, life expectancy was 70, designed so benefits for only 4 years

3.Truthandaccounting.org to find out State financial condition

4.Usdebtclock.org

5.51% of the U.S. population does not pay taxes; where are we going to get the money?

Challenges Facing Americans

Challenges Facing Americans

Challenges Facing Americans

Facts About National Debt1

Facts About National Debt1

1. Spend Less2. Tax More

There are only two ways to combat the growing debt…

Are we spending less as a government?

We are spending more than we ever have in the

history of our country.

ARE WE GOING TO STOP SPENDING?

So the only solution seems to be…

Higher TAXES

History of Federal Individual IncomeTop Marginal Tax Rates

Source: truthandpolitics.org, referencing IRS Statistics of Income Bulletin Pub 1136

Types of Retirement IncomeTaxable

Earnings on:

• Stocks

• Mutual Funds

• Sale of Business Interests

• Real Estate

Income From:

• Wages & Interest

• Social Security

• IRA

• SEP

• SIMPLE

• 401(k)

• 403(b)

Capital Gains Ordinary

Retirement Income – Tax Free

• Municipal Bonds

• Roth IRA

• Life Insurance Cash Value*

*Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. Surrender charges may reduce the policy's cash value in early years.

Overfunding a permanent life insurance policy creates the risk that the policy will become what is known as a Modified Endowment Contract (MEC.) For MECs, contract loans and withdrawals are considered taxable income.

Smart Investment Order List

1. Free Money- Inherited - Matching 401(k) Money

2. Tax-Free Money

3. Taxed Deferred Money

4. Taxable Money

Smart Retirement Money Order

Smart Retirement Money Order

1. Free Money

2. Tax-Free Money

3. Taxed Deferred Money

4. Taxable Money

Any investment above the match of your 401(k) becomes tax-

deferred money, and skips over #2 completely.

Tax-Deferred

0 Tax on Deposits

Tax Deferre

d Growth

Tax-Free

After-Tax

Deposits

Example

Tax Deferre

d Growth

Taxed AsOrdinary Income On Withdrawal

$0 Federal Tax For QualifiedDistributions

Would you rather pay tax on this…

Traditional IRA

Tax-deferred

0 Tax on Deposits

Tax Deferre

d Growth

Roth IRA

Tax Free

After-Tax

Deposits

Example

Tax Deferre

d Growth

Taxed AsOrdinary Income On Withdrawal

$0 Federal Tax For QualifiedDistributions

Or this?

Traditional IRA

Tax-deferred

0 Tax on Deposits

Tax Deferre

d Growth

Roth IRA

Tax Free

After-Tax

Deposits

Example

Tax Deferre

d Growth

Taxed AsOrdinary Income On Withdrawal

$0 Federal Tax For QualifiedDistributions

So when you put money into an IRA or 401(k) are you

really saving tax?

No. You are simply delaying tax -

which actually compounds the tax problem.

Making it much worse!

How It Works with Universal Life Insurance

Premium$

- fees

UL Life Insurance Policy

$MinimumCompanyRequires

Maximum IRS Allows

Death Benefit

What’s Best for You?

Roth IRA?

What’s Best for You?

Universal Life Insurance?

What’s Best for You?

Both?

Next Steps