There are many different vehicles in which to invest your retirement savings. Here's a quick primer on the pros and cons of each.
There are many different ways to save for retirement. The list includes, but is not limited to: 401(k) plans, 403(b) plans, IRAs, stocks, mutual funds, real estate, life insurance, and annuities. The information available on each of these is enough to make your head spin. To make matters worse, the information is complicated, it’s conflicting, and far too much of it is misleading or misinformation. A good way to eliminate the confusion is to look at this side-by-side comparison chart showing the pros and cons of each.
I did not include the Roth IRA, because most physicians make too much money to qualify. Moreover, even if their spouse could qualify, the restrictions are such that a Roth is not very useful for our purposes.
Row #1 Good Growth: Shows that all of these retirement savings vehicles have good growth potential.
Row #2 Market Risk: Shows only indexed annuities and permanent life insurance are free of market risk. Good growth is pointless when you lose it in a market crash. It’s what you keep that counts.
Row #3 IRS penalties: Shows that the qualified plan is subject to IRS penalties for early withdrawal.
Row #4 Tax Deferred: Shows the qualified plan, indexed annuities, and permanent life insurance give you the benefit of having your money grow tax-deferred.
Row #5 Tax Free: Only permanent life insurance gives you tax-free retirement income. Remember, it’s not what you have in your retirement account that’s important, it’s what the government lets you keep.
Row #6 Guaranteed Lifetime Income: Only annuities and permanent life insurance can guarantees you will never run out of money in retirement. Moreover, only permanent life insurance gives you guaranteed lifetime income that is tax free.
Row #7 Critical Illness Benefit: Permanent life insurance is the only retirement savings vehicle that provides a critical illness benefit. It provides up to $1.5 million cash tax-free in the event you are stricken by a heart attack, stroke, cancer, blindness, ALS disease, or end-stage renal failure.
Row #8 Chronic Illness: Only indexed annuities and permanent life insurance provide benefits for chronic illness. This benefit is a great alternative or supplement to long term care insurance.
Row #9 Death Benefit: Annuities and permanent life insurance are the only two retirement savings vehicles that have a death benefit. An annuity death benefit is limited to the account value at the time of death. However, nothing can compare to the tremendous value of a life insurance policy death benefit.
The above chart makes it clear why permanent cash value life insurance should be your primary retirement savings vehicle. The others are great but, permanent life insurance is the clear winner.
If you have questions send me an email to David@TheAlemianFile.com. Check out my website at PhysiciansRetirementPlan.com, and make sure you come back here next week to Physicians Money Digest for another edition of The Alemian File. I'm David Alemian. My contact information in next. Thank you for watching.