Customer Review

Reviewed in the United States on September 1, 2019
I have very mixed feelings about this book. Among the things I really like are (1) it's emphasis upon the importance of tax planning as an important part of retirement planning, and (2) concrete examples of how tax planning is performed that demonstrate the complexities involved.

On the negative side, this book is premised upon a misleading assertion, one that any good undergraduate textbook on taxes and tax planning warns every student against. Simply put, the goal of tax planning isn't to reduce or even eliminate taxes, rather it is to maximize the after-tax funds available for spending. From this perspective investment fees are just as bad as taxes, since both reduce what's available for spending. Certainly reducing taxes is an important tool to the achieve the ultimate goal. But reducing taxes while at the same time letting investment fees leap up (i.e. fees associated with life insurance policies) isn't usually the best route to maximize spending over the course of retirement.

The uninformed reader of this book would certainly come away with the impression that life insurance is as good or better than a Roth IRA as a mechanism for maximizing spending funds over retirement. This is decidedly false. It's not that hard to set up Roth IRAs with no annual fees and investments that amount to 0.10% or less on an annual basis. All-in fees for life insurance policies are 10-20 times larger. If you want a simple guide to minimizing Roth investment fees, search here on the Amazon website for "Investing made Simple" by Mike Piper.

I was also disappointed that through most of the book the author referred to LIRP's as having tax-free distributions, making them comparable to Roth IRAs in this regard. It isn't until the last chapter of the book that that actual tax-deferred nature of LIRP distributions is revealed, along with the "work around" of taking loans from the insurance company to avoid taxes. Of course as a financial educator I already knew this. So I can only describe as "extremely misleading" that this key fact isn't honestly stated earlier in the "LIRP Chapter". And in spite of the authors strong suggestion that such loans will cost you nothing, don't believe it. If the insurance company doesn't charge an explicit annual interest fee for the loan, they will get that money from you via implicitly higher administration and mortality charges. There are NO truly free loans!

With all the discussion about Roth IRAs I found it suspicious that Roth Accounts weren't mentioned. Most 401(k), 403(b) and public 457(b) plans now incorporate a Roth Account. This feature allows workers to aside quite large amounts of after-tax dollars for tax-free spending in retirement. For 2019 up to $19,000 could be set aside in a Roth Account, plus another $6,000 for those age 50 or older. And people can continue to set aside money in their own Roth IRAs on top of their workplace savings! Of course all this Roth Account / Roth IRA saving wouldn't leave money for paying life insurance premiums, and I suspect that's the reason this detail wasn't mentioned!

Finally, the question of exactly how high taxes will rise in the future is a difficult one to answer. I agree with the author that, at least for upper income people, tax brackets will rise and deductions will shrink. Many politicians are even seriously considering a Wealth Tax, which could seriously rearrange many people's tax planning strategies. But unlike the author, I don't expect that the existing 10% or 12% tax brackets will rise above 15%. Normally even those tax brackets would lead to some Social Security taxation. But a portion of the SECURE act that has passed the U.S. House contains a provision for drastically increasing the income allowed before Social Security income starts to become taxable. Thus becoming too aggressive in paying higher taxes now in a rush to attain no income taxes in retirement may well lead to lower total spending in retirement than a more modest approach.

A very intriguing paragraph in the book occurs on page 11 where the author takes us back to the 1960 - 1963 time frame when the lowest marginal tax bracket was 20% and the highest was 91%. Those brackets sound scary, but the calculation of income tax isn't always straightforward. For retirees at that time there was a "retirement income tax credit" in existence that was quite substantial. When the tax system for 1963 is converted into 2019 dollars, a 65 year old retired couple would need to have had over $150,000 of income to even begin to pay federal taxes. If only we had such low taxes today! And the reference to 94% tax bracket on income above $200,000 in 1943? In 2019 dollars, that becomes about $3 million.
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