So you’ve prepared for retirement with 401(k)s and IRAs. You’ve got a good nest egg going. Feeling pretty good about it, right?

If you’re looking for a tax-free retirement, the harsh reality is that you may not be as prepared as you think. If you’re relying on your traditional IRA/401(k) to supplement your Social Security benefits and maybe even pension, be prepared to have taxes erode away your cash.


You may not realize that when you reach retirement, you may lose many of the deductions you once enjoyed, such as home mortgage interest, dependents, and retirement plan contributions. And if you’re a business owner, you’ll be losing even more deductions. Although you may have less income during retirement, your taxable income may be just as high or higher!

If you don’t take action to avoid paying excess tax, you’ll likely be in for a rather unwelcomed surprise during your retirement years, which could result in living a lower lifestyle, or outliving your money.

No matter how you look at it, paying less in taxes means keeping more for yourself. In our opinion, as part of your tax-reducing retirement strategy, you should take a serious look at max funded, tax-advantaged insurance contracts as an option for developing a tax free retirement.

*Life insurance policies are not investments and, accordingly, should not be purchased as an investment.


Along with their important death benefit, these contracts can be structured to hold your serious cash (by serious cash we mean money you have set aside for retirement). When structured correctly and funded properly, these contracts shelter you from the danger of increasing taxes.

To be clear, the tax advantages of these contracts are no secret or shadow game, just simply too complex for the average financial advisor or financial professional to implement without developing an expertise through years of research and training. Unfortunately, many advisors or accountants who “haven’t done their research” end up having strong and uneducated opinions that are not based on facts, especially regarding the tax benefits and internal rate of return that can be achieved.

Tax Savings #1 – Money put into these insurance contracts has already been taxed at today’s rates, not tomorrow’s. With tax rates likely going up in the future (to unknown amounts!), getting taxes over and done can be financially critical. Keep in mind, you’d always rather pay taxes on the seed money than the harvest money.

Tax Savings #2 – Money taken out of your contract—when done optimally, in accordance with Internal Revenue Code guidelines—is not regarded as taxable income, as opposed to income from a traditional IRA/401(k). You can also access your money tax-free using several methods. The smartest and best way to access your money from a max-funded, tax-advantaged insurance contract is via a loan, rather than a withdrawal.

Here’s why:

When done correctly, it is a loan made to yourself that is never due or payable in your lifetime. To be in compliance with IRS guidelines, an interest rate is typically charged, and then that interest is offset with interest that is credited on the money you didn’t “withdraw,” but rather remained there as collateral for your loan. This results in a zero net cost in many instances.

Loans taken from your contract ARE NOT TAXED, because they aren’t deemed earned, passive, or portfolio income—which are the only types of income that are subject to income tax on a 1040 tax return. See section 7702 of the Internal Revenue Code.

A maximum-funded tax-advantaged insurance strategy, when structured properly and loans taken correctly, will not hit your tax return. That is powerful.”

-Jim Whitehead, CPA

Tax Savings #3 – With industry laws and regulations that have been in place for more than 100 years, the money that accumulates inside of a life insurance policy does so tax-favored. As a “life insurance policy” increases in value due to competitive interest being earned, no taxes are due on that gain, as long as the policy remains in force. Many financial vehicles, such as savings accounts, CDs, mutual funds, and money markets will typically have tax liability on their gain. See section 72(e) of the Internal Revenue Code.

1. Policy loans and withdrawals will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult a tax professional.

Policy loans are not usually subject to income tax, unless the policy is classified as a modified endowment contract (MEC) under IRC Section 7702A. However, withdrawals or partial surrenders from a non-MEC policy are subject to income tax to the extent that the amount distributed exceeds the owner’s cost basis in the policy.

Tax Savings #4 – Upon your death, the money in your insurance policy transfers to your heirs and beneficiaries completely income tax-free. See section 101(a) of the Internal Revenue Code.

In summary, we have never seen any other money accumulation vehicle that accumulates money totally tax-favored, then later allows you to access your money totally tax-free. Then when you ultimately pass away, it blossoms (increases) in value and transfers to your heirs totally income-tax free.

As a side note, we don’t recommend that every retirement dollar you set aside be in a max-funded, tax-advantaged insurance policy. While you will learn more during one of our seminars or personal consultations, just know that significant amounts of taxes can be reduced by including this type of insurance contract in your retirement portfolio—or by making it your primary retirement planning strategy like thousands of other highly successful, wealthy people have done.

Many years ago, early in my career, I remember going to a tax seminar done by a national CPA firm. I asked the instructor about accumulation of wealth using maximum-funded, tax-advantaged insurance contracts and he said, ‘This is one of the most powerful things that I’ve ever seen.’ I was a younger CPA then and was impressed with his response. I’ve worked with Doug over the years and am impressed with his concepts and who he is. The accumulation of wealth inside a MFTA insurance contract is very, very powerful.”

-Marvin Paul Neumann, CPA


As a hypothetical illustration, let’s say that you want $100,000 per year during retirement for travel, fun, and expenses, and you’re in a 33% tax bracket (between all of the taxes you pay).

The 401(k) Way: In order to net $100,000, you’ll need to pull $150,000 out of your 401(k). In other words, you’ll be sending $50,000 (or one-third of your money) in taxes to Uncle Sam!
The MFTA Way: In a properly structured max-funded, tax-advantaged insurance contract, a loan of $100,000 equals $100,000. Zero dollars go to taxes!

How much longer will your hard-earned money last if you don’t have to pay tax on that money? How much more peace of mind will you have if you don’t have to worry about your money running out due to increasing taxes eating away at your distributions? Based on the same net spendable income, empowering yourself with this strategy can be the difference between depleting your retirement nest egg in seven to 11 years, versus never outliving your money based—no matter how long you may live.


To be clear, the tax advantages of max-funded, tax-advantaged insurance contracts are no secret. They are, however, complex for the average financial advisor or financial professional to implement without years of research and training. Unfortunately, many advisors or accountants who “haven’t done their research” can end up demonstrating a resistance to these contracts, based on uneducated or limited opinion versus fact, especially regarding the tax benefits and internal rate of return that can be achieved.

Also to clarify, these are not tax loopholes. Max-funded, tax-advantaged insurance contracts have been used by the wealthy, both personally and in business, to protect and perpetuate wealth for decades. Many affluent and successful people have utilized these strategies to attain a tax free retirement. The IRS has fully defined these benefits within Internal Revenue Code sections 7702, 72(e), and 101(a).


Over the last four decades, we have helped many highly successful people accumulate their money safely, earning predictable, tax-free rates of return averaging 7–10%. What that means is, when they retire, every $1 million dollars they have accumulated can generate $70,000 – $100,000 per year of tax-free income (aka tax free retirement), without depleting the principal on their nest egg!

To get started meeting with a professional from our firm, click here or call us at 888-987-5665. If you would like to learn more, attend an online or in-person event. Click here to register now.