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You know tax rates in the future are likely to be much higher than they are today.  Yet even with that head knowledge, many of us are doing the exact opposite of what we should be doing to minimize their impact, by saving money in tax-qualified plans like IRAs, 401ks 403bs and a few others.

You may be doing so because you’re getting matching funds from your employer (free money) and/or because more of your dollars are invested since they go in pre-tax.  But that’s the deception of the qualified plan.

Here’s reality.  Let’s say you put $1000 into a 401k or similar plan – your employer matches 50% – and taxes will be 50% when you retire.

Your account statement may show $1,500 – but only half of that is really yours – the rest is due Uncle Sam when you retire.  Hold up on that condo purchase!

But here’s the kicker.  You’re plan provider is going to charge you fees and commissions to manage both your $750 -and Uncle Sam’s $750.  In other words – Uncle Sam is having his money professionally managed and you’re paying for it!

Why not pay the tax on that $1,000 and invest the $700 – $800 that’s left – in a tax-free vehicle like a Roth IRA, or a cash value life insurance contract.

You’ll pay NO taxes in the future on either; you’ll pay fees and commissions on $700 – $800 instead of $1,500; and the rate of fees and commissions will likely be much less because you’re not in a high-cost tax-qualified plan.

Choose the life insurance route and all those fees and commissions will be refunded back to your estate in the form of the insurance benefit.