The tax savings on the IRA was based on the deposits ONLY, not on the entire accumulations since BOTH the IRA and the insurance product shelter the money during the accumulation period from current taxes. I feel that this is an honest view of what occurs. As for a lower tax rate at retirement, I feel—as do many—that it is a false assumption that retirees will be in a lower tax bracket. Many feel that taxes arc going up. even though the brackets may be lower. Why? Because we have fewer deductions. At retirement we may not have a deduction for the interest on a mortgage, since most of us want our homes paid off by that time. There will also be no business deductions, since we will be retired and not working. Okay, I was wrong on all the taxes being paid back in a "little over two years." Sorry about that. It does take 3.07 years which, based on my poor math abilities, is a "little over two years!" I'm guilty. I still feel it is a very important point that there are taxes that need to be paid on the cash flow from most retirement plans, except the ROTH IRA. That is usually overlooked by most who are considering a retirement plan. That is why I wanted to bring it to everyone's attention. Yes, the correct answer is a "little over three years," or to be exact, a "very little over three years." I stand corrected. Yes, we do need to take into account the time value of money, while at the same time one should not ignore the more than $1.5 million that will be paid in taxes at retirement. To be exact, $1,541,540, which is a "little over $1.5 million!" Sorry about that again!! Even if the individual is in a lower bracket, the taxes paid will still far exceed the tax savings of $135,000. Of that, I am sure. Yes, the ROTH does have some benefits that the regular IRA does not have, and that is exactly my point. The only problem is that the ROTH is limited with current contributions of just $4,000 per year. My point is that, at retirement, which would you rather have: a "net after-tax" retirement income of $ 102,771, or $ 189,000? Even if this retiree could avoid ALL taxes and stay out of jail, which is better: $146,815 or $189,000? I know my math abilities are limited, but even I can see there is a difference! Yes, I am a financial planner and I am licensed to sell most financial products, including life insurance and mutual funds, which can be used to fund qualified retirement plans. That is true with the vast majority of planners. That is why I know how the plans work and also how they are taxed. I feel that I have presented a total picture of how these plans work and I leave it up to the readers to make their own decisions as to what they feel is best for them. At least, now they have seen the ENTIRE picture as opposed to just the tax savings on the deposits. Maybe now the readers will ask more questions before they sign on any dotted line for any plan. By the way, this idea is not something that only I have discovered. It was also mentioned in an article in the August 2003 issue of Kiplinger's Magazine in an article titled "YOU EARN TOO MUCH". Stanley B. Greenfield, RHU
