According to the Employee Benefit Research Institute as of year-end 2005, total assets in tax-qualified U.S. retirement income plans (both defined benefit and defined contribution) amounted to $14.388 trillion.

Qualified retirement plans, as a whole have recovered from the losses experienced since 2002, when total assets amounted to only $10.139 trillion.

For many families today, their IRA, 401k, or other type of retirement plan represents the majority of their overall estate value.

No matter what the value of your own personal retirement plan is presently…only you know the hard work and sacrifice it took to get where you are today.

As you reflect on the years of contributions to the plan and how the investment decisions that you made have paid off, I truly hope that you get a sense of pride and satisfaction over your accomplishments.

And, while most of the hard working folks I visit with every day have spent a good deal of time focusing on the “accumulation” of IRA / 401k retirement plan assets…..very few have given much thought at all to the efficient “distribution” of those assets during their lifetime and beyond.

Think about it. Do you currently have an “IRA Distribution Game Plan” that takes into account the asset allocation of your portfolio for income generation once your required minimum distributions start at age 70 1/2? Have you given much thought to potential tax reduction strategies once this income is forced upon you? What about preventative measures to offset these future taxes before forced distributions even begin?

Do you know if your IRA or 401k is exposed to double taxation?

Yep! You read that correctly. Many readers currently have a retirement plan that may be exposed to 2 layers of potential taxation.

Estate tax when combined with income tax on an inherited IRA can reach as high as 65% of your hard earned retirement plan being consumed in double taxation today. And, unless we see a future law change in Congree, that number could reach as high as 74% in 2011.

When it comes to the ultimate passing of your retirement plan assets from one generation to the next…if you were to take all of your assets and line them up from best to worst from a tax efficiency standpoint…your IRA or 401k would rank at the bottom of the list.

Fortunately there are viable solutions.

Click on the video link below for a more in-depth discussion on this issue. After viewing the video, if you’d like to discuss putting together your own personal “IRA Distribution Game Plan” feel free to send me an email to eli@freemarketfinancial.com

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Anyone else read the great news story about Elsie McLean?

Ms. McLean is 102 years old, happy and healthy. If the circumstances stopped there, that would be a great story! But, if you’re a golfer (or even occasionally play the game) it gets a lot better…you’ll appreciate this.

Elsie was out playing golf (yes, she plays regularly) with her friends Elizabeth Rake and Kathy Crowder. On the 4th hole at Bidwell Park in Chico, California, a 100-yard par 3, Elsie teed up her ball and pulled her driver from her bag. She hit the ball toward the green, but because of the slope of the green she and her playing partners were unable to see where the ball landed and finally came to rest. Arriving at the green, Elsie still couldn’t locate the ball and could only assume that she lost it.

Then, her friends Elizabeth and Kathy decided to look in the cup, just in case. There they found Elsie’s ball – a hole-in-one!

Elsie had become the oldest golfer ever to make a hole-in-one, breaking the record held by Harold Stilson, who at age 101 made a hole-in-one at Deerfield Country Club in Florida.

When the local media asked what her reaction was Ms. McLean answered, “Oh my Lord. It can’t be true; it can’t be true.”

For the record, it was Elsie’s first ever hole-in-one, although she claimed to have come within inches once. Ms. McLean has been featured in golf magazines before, and to celebrate her hole-in-one, she appeared on ‘The Tonight Show” with Jay Leno.

McLean’s final comment to the local media who interviewed her after her accomplishment: “For an old lady, I still hit the ball pretty good.”

The lesson learned?

The average retiree can expect to live 18- 24 years in retirement today. A simple cost of living increase of 4% means that in 10 years, a retiree will need to spend almost 50% more in order to maintain their same standard of living.

Is your portfolio prepared?

For a complimentary initial assessment, send me an email to eli@freemarketfinancial.com

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Arbitrage….

Many folks have no idea what the word means, or, more importantly, how you may be able to increase your retirement income from the concept.

Click on the video link below to view a quick 9 minute presentaion that explains how you may be able to create a perpetual stream of increased income in retirement that reduces your taxes and protects your hard earned principal.

Simply put, an arbitrage is exploiting a price variation.

Assume for a moment that I introduce you to a source that will loan you all the money you want, with no questions asked and the interest rate that you’ll pay on your loan is 4% locked in for the rest of your life. (Please note this is an exercise in imagination, but will do a good job of illustrating the point.)

Now, assume that I introduce you to another source that will allow you to invest all the money that you want, and this source will pay you 6% interest on all the money that you want to invest. On top of that, the rate of interest credited is guaranteed never to change.

Armed with that information, here’s my question for you: How much money would you like to borrow at 4% and re-invest it at 6%?

That’s an arbitrage - taking advantage of a price variation.

The problem with many arbitrages is that they’re simply not that clean, neat, and predictable. Many arbitrages exist one day and then evaporate the next.

That’s where an advanced financial planner can make all the difference.

You see…there’s one arbitrag that may be the proverbial exception to the rule. That’s the good news.

The bad news is that while this arbitrage will work well for some clients it won’t work at all for others.

Take the following example:

1. Chuck is 75 years old in retirement with an investment portfolio of bonds worth $2,000,000.

2. Chuck’s current average yield on this bond portfolio is 4.5%. This means that Chuck is receiving investment income from this retirement portfolio of $90,000 per year.

3. Chuck looks into a strategy that may allow him to increase his retirement income from his investment portfolio and guarantee his heirs a tax advantaged $2,000,000 inheritance.*

4. Chuck uses his investment portfolio to buy a $2,000,000 medically underwritten, lifetime income contract* that pays him $285,480 annually for the rest of his life in retirement. **

5. Chuck also buys a $2,000,000 life insurance policy to provide a $2,000,000 inheritance to his heirs completely income and estate tax free.

6. The premium for the $2,000,000 life insurance policy on Chuck’s life is $121,000 per year. Chuck will pay the premium from the increased income he’s receiving from his investments*.

7. By utilizing this strategy, Chuck will increase his spendable income in retirement from $90,000 to $164,480 per year after paying his insurance premium, plus guarantee a tax advantaged $2,000,000 inheritance to his heirs.

For more information on how this retirement income arbitrage strategy may work for you, contact Houston Financial Planner Eli Mitcham at 1-800-960-3499 or send me an email to eli@freemarketfinancial.com

*The asset being illustrated here is a life insurance contract and Death benefit amount noted is guaranteed by the claims-paying ability of the issuing insurance company. The purchaser should consider the issuing insurance company’s credit rating when contemplating a purchase**The asset being illustrated here is a Single Premium Immediate Annuity and the income benefit is guaranteed by the claims-paying ability of the issuing insurance company. The purchaser should consider the issuing insurance company’s credit rating when contemplating a purchase. The identified strategy is an acceptable option when the retiree is certain that he is or she does not need to withdraw any amount above the annual income amount at present or at anytime in the foreseeable future.

Advisory services offered through Free Market Financial, LLC

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