QPDA Techniques
Best Selling Point
Explanation illustrating selling point
Early Distributions
Use IRA for premiums and avoid 10%, early distribution penalty.
Your client likes the idea of using her IRA as a source of premiums, but does not want to pay the 10% early distribution tax penalty. This objective shows the “safe-harbor” methods of distributions. These amounts are the largest distributions that could be taken without the 10% penalty applying.
Basic Minimum Distributions
What do I have to take? What will happen to my plan when the required distributions begin?
Illustration showing required minimum distributions each year. One ledger focuses on what you have to take; another ledger illustrates what is left in your plan -- complex calculations made quickly!
Lump Sum vs. Rollover
Client wants to just take his money, settle with IRS, and not worry about tax rules after that.
Your client is confused and upset over all the tax rules concerning his qualified plan moneys. He is ready to just take his money, pay any taxes that may be due, and not mess with the IRS after that. This one-page ledger compares doing just that with a rollover. Client sees the after-tax costs or benefits of each arrangement.
Using Distributions for Retirement Income
More after-tax income now, and perhaps more after-tax income later!
The Required Minimum Distributions is a percentage of the balance in your plan, and this percentage increases every year. If you take just the minimum amounts in your early retirement years, there will be more remaining funds to accumulate. As you get older, your plan grows larger, the required percentage gets bigger. Results: larger taxable distributions are required as you get older. This objective helps you plan your distributions to take more while younger so that less must be taken later, often reducing the taxes; thus, more after-tax income in your early as well as later retirement years.
Using Distributions for New Life Insurance
A great source of premiums for needed life insurance without cutting other expenses
This most popular and frequently used objective shows how the client’s IRA can be the source of premiums for needed life insurance. Finding the premium dollars is often harder than selling the life insurance need. This objective shows the effects of using the IRA funds during the client’s lifetime and at death.
Using Distributions for Charity
Providing for your heirs, your charity -- but not the IRS
This objective shows how combining tax benefits of life insurance and tax benefits of leaving your IRA to charity can provide that desired bequest to charity, but not at the expense of your heirs. Your heirs win, your charity wins, but, the IRS loses.
Stretch IRA
Multi-generational planning
This objective shows the effects of taking just minimum distributions from your qualified plan, minimizing income taxes on distributions, and “stretching” the values over the next generation. In addition to the clear graphics that make this concept easily understood, it shows the amount of life insurance that assures the client that the heirs will have funds for final expenses, so that all of the retirement funds can be used with this technique.
Stretch Roth IRA
Use life insurance to convert at death and provide multi-generations with income
This objective shows converting an IRA to a Roth IRA at death, if it is not already a Roth IRA. Then, it accumulates income tax-free and is passed to the heirs, where it can continue to accumulate income tax-free. Any of the heirs can take an income tax-free distribution at any time from their “stretched” IRA.
Stretch 403(b)
Multi-generational planning with a tax-sheltered annuity
This objective shows the effects of taking only minimum distributions from your tax-sheltered annuity plan, minimizing income taxes on distributions and “stretching” the values over the next generation. In addition to the clear graphics that make this concept easily understood, it shows the amount of life insurance that assures the client that the heirs will have funds for final expenses, so that all of the retirement funds can be used with this technique.
Convert to Roth IRA during Lifetime
Help answer your client’s question, “Should I convert my IRA to a Roth IRA?”
Every situation is different. Only by comparing the effects of converting to not converting can a client be sure. This objective does just that. And, the best way to communicate the results is with clear graphs. It is easy to see which solution is best.
Convert to Roth IRA at Death
Converting your IRA at death and using tax-free life insurance proceeds to pay taxes on conversion -- heirs can accumulate funds tax-free and/or take tax-free income distributions!
Combine the best qualities of the Roth IRA, tax-free accumulations and distributions, with the best qualities of life insurance, tax-free proceeds payable at death, and you have a great tool to help your clients. The biggest obstacle of converting an IRA to a Roth is the taxes due at time of conversion. By converting at death, the tax-free life insurance proceeds are used to pay the taxes due on the conversion. The heirs have the IRA values in an account that is accumulating tax-free, does not have to be distributed so that it can be left for their heirs, but if it is distributed, the distributions are tax-free. All these advantages are illustrated graphically and with simple ledgers.