Do Your Contributions Exceed Tax-Qualified Retirement Plan Limits? Here’s What You Should Do
Currently, the contribution limits for 401K and IRA accounts are too small for those earning a high six-figure income and beyond. Because of that, it’s important to know about the other retirement strategies that allow for high contribution limits and no contribution limits. Here’s a look at three ways to protect more of your wealth for retirement planning.
Annuities
Annuities are life insurance contracts where you can receive a payout immediately or sometime in the future. There are several different types of annuities that all offer tax-deferred benefits:
Deferred Variable Annuities - For those with a longer time horizon, deferred variable annuities offer a chance for growth. However, there is some market risk.
Deferred Variable Annuities with a Guaranteed Minimum Accumulation Benefit - For those who want to lower their risk, this annuity plan allows you to gain from market growth. However, this annuity provides a floor from market downturns to provide minimum accumulation benefits.
Deferred Fixed Annuities - For those who want a fixed payment for a certain period of time, deferred fixed annuities provide the safest protection from market volatility.
One of the great qualities of annuities is that there is no limit to how much you can contribute. High net worth individuals should absolutely integrate annuities into their overall retirement planning.
Qualified Longevity Annuity Contracts (QLACs)
Many people tend to outlive their money. To plan ahead for a long life, Qualified Longevity Annuity Contracts or QLACs allow you to put off payments until the age of 85. QLACs are purchased from funds in your IRA or 401K. That means all accumulated gains on your QLAC are taxed differently. QLACs have a contribution limit of $135,000 or 25% of the total value of your qualified accounts. For instance, if you have $500,000 in your qualified accounts, you can contribute up to $125,000 to your QLAC.
Life Insurance Retirement Plans (LIRPs)
Life Insurance Retirement Plans or LIRPs is a cash value life insurance policy that allows you to withdraw money in retirement. The big advantage of LIRPs is that there is no age requirement for distributions. Therefore, you can tap into other retirement funds before you pull an income from your LIRP.
Tax Efficient Retirement Solutions for High Net Worth Individual
When you have reached the limit on our qualified accounts, be sure to consider annuities, QLACs, and LIRPs in your retirement planning. A wealth management advisor will be able to create the right game plan to ensure that you are as tax efficient as possible during your retirement.
