Your savings can be taxed if you set your life insurance up incorrectly.
Simply put, when you deposit “too much” into a life insurance policy, you create a “Modified Endowment Contract” (MEC.)
So, what are the disadvantages of an MEC?
Any gains you make in your policy will be taxed at your individual tax rate
There’s a 10% early withdrawal penalty if you try to take out before 59.5
Because of the 10% penalty, your money is far less accessible (and won’t be as useful when trying to snowball your nest egg)
Once your policy has been established as an MEC, it’s impossible to overturn.
So, how do we avoid converting our policy into an MEC?
In today’s episode, you’ll discover how to make sure your policy remains tax free forever.
Show Highlights Include:
How converting your policy into an “MEC” forces you to pay income tax on the growth of your savings (1:03)
The weird way you can receive the same payout from your life insurance policy if you deposit $50 a month instead of $200 a month (5:09)
How to avoid paying any agents or brokers fees when investing in a whole life insurance policy with “paid up additions” (6:06)
Why shrinking your policy’s death benefit legally forces you to receive a higher payout when you retire (11:15)
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