Roth IRA Mirror Plan – A Tax Advantaged Asset Accumulation Strategy

Roth IRA Mirror Plan – A Tax Advantaged Asset Accumulation Strategy

  • Are you paying too much in Federal Income Taxes?
  • Do you want to minimize the impact of higher taxes?
  • Are you looking to accumulate wealth on a tax-advantaged basis?

The changes enacted by the Patient Protection and Affordable Care Act (PPACA) affect many types of income and taxes. For example:

  • The top tax rate on ordinary income has increased to 39.6% for married joint filers earning in excess of $450,000.
  • For these same taxpayers, the top tax rate on long-term capital gains has increased to 20%.
  • A 3.8% surtax is levied on a couple’s adjusted gross income in excess of $250,000 (or total net investment income if lower).
  • An added 0.9% tax is levied on a couple’s wages in excess of $250,000.

As a result of these increased taxes, a couple’s tax rate could approach 50% between Federal and Massachusetts Income Tax.

As a result of these confiscatory taxes, a wealth accumulation concept gaining traction is the Roth IRA Mirror Plan. This tax advantaged asset accumulation and income distribution strategy utilizes a permanent life insurance product, typically Indexed Universal Life, and has the following features:

  • Similar to a Roth IRA, after tax dollars are contributed to the Plan.
  • Market correlated cash values accumulate tax deferred within the policy.
  • Distributions come out of the product income tax free via withdrawals to cost basis and policy loans.
  • Policy Death Benefit is minimized to maximize cash value growth and distributions.
  • Distributions can be taken prior to age 59 ½ without any income tax penalty.
  • Creditor protection for cash value is available in Massachusetts.
  • Income tax free death benefit payable to the beneficiary.
  • If the policy is properly structured, there will be no federal income tax as long as the policy is not surrendered or lapsed.

A Roth IRA Mirror Plan is ideal for individuals who have maximized their contributions to a 401(k) Retirement Plan. If you are looking for a program that can provide many of the benefits of a 401(k) while eliminating may of its restrictions, (i.e. contribution limits, income requirements, age-related withdrawal limitations), the time is now to investigate the Roth IRA Mirror Plan.