To eliminate debt, we advise our clients to simply be more strategic with the money they have already allocated to pay down their debt and not pay out so much that it adversely affects their ability to continue to contribute to their 401(k) or IRA. Here’s an example of a strategy we frequently use that eliminates debt and simultaneously creates a tax-free retirement income.
A 41 year old married man with two kids has a $50,000 second mortgage. His goal is to pay off the second mortgage as quickly as possible. He makes payments of $900/month even though the minimum payment amount on the interest only loan is $200/month.
We developed a plan where this client will only make the minimum payment of $200/month to the loan and instead pay $500/month (saving $200/month) into an Indexed Universal Life Policy. Our client will only need to make payments into the policy for 10 years. At that point, he will take a policy loan from the life insurance policy to pay off the $50,000 second mortgage. Our primary goal of eliminating the debt will be achieved.
Here’s where it gets exciting. From age 51 to 62 our client no longer needs to make any payments into the life insurance policy, yet the cash value will continue to grow. At age 62 he can convert the life insurance policy into $1500/month tax-free income that will last the rest of his retirement life.
You can learn more at www.montinico.com or email me at email@example.com for a custom illustration.
Marc Montini and his partner Dennis Farrah have over 50 years of combined experience in helping people protect and grow their retirement assets They use tax-efficient strategies to develop retirement income plans that will last for 20-30 years of retirement.