A Closer Look
at Each Asset Category
From an income tax perspective, the assets in your portfolio can be categorized into three buckets—taxable, tax-deferred and tax-free.
Diversifying across these buckets can help minimize the impact of taxes on your portfolio, helping to maximize your portfolio’s overall long-term growth.
This table shows the general tax implications for each asset category, and other important features.
Taxable
Tax-Deferred
Tax-Free
Not subject to 10% penalty on
distributions prior to age 59½
Not subject to Required Minimum
Distributions (RMD’s)
Distributions don’t impact taxation
of Social Security Benefits
Distributions don’t increase
tax bracket
Protection from market downturns
Income-tax-free death benefit
Avoids probate at death
No annual limits on contributions
Tax-deferred accumulation
Income-tax-free distributions
Stocks
Bonds
Mutual Bonds
CDs
Savings Account
Annuities
Qualified Plans
401(k)/403(b)
Traditional IRAs
Roth IRAs
Permanent Life Insurance
As you can see, life insurance can be a great addition to your portfolio, helping to minimize the impact of taxes and offering other great advantages.
Look at Life Differently
Permanent life insurance provides a death benefit to protect your family, but also accumulates cash value that you can access at any time, for any reason – and in most cases, income-tax-free.
Soon
+
Buy a home, start a business, pay for a loved one’s education.
Later
+
Fill an income gap, supplement your retirement income, cover unexpected expenses.
Much later
+
Leave a legacy, transfer wealth, give to charity.
*
Accessing cash value will reduce your policy death benefit and values, may result in certain fees and charges and may require additional premium payments to maintain coverage.
taxes due when money is withdrawn
Taxable
Tax-Deferred
Tax-Free
taxes due on income and gains
funded with after-tax dollars, no taxes due on gains and distributions
Taxable
Tax-Deferred
Tax-Free
1
1
With the exception of variable products, including variable annuities and variable universal life.
1
2
1
With the exception of variable products, including variable annuities and variable universal life.
2
Accessing cash value will reduce your policy death benefit and values, may result in certain fees and charges and may requireadditional premium payments to maintain coverage.
Reference to the taxation of products in this material is based on Penn Mutual’s understanding of current tax laws. Penn Mutual and its representatives do not provide tax or legal advice. Please consult a qualified tax professional regarding your personal situation.
*
*
The $50,000 withdrawal is post age 59 and pre-RMD age.
Total Net Income
$125,000
Net
Income
$50,000
Tax-Free
$0
Withdrawal
$50,000
Life
Insurance
Net
Income
$32,500
Ordinary
Income Tax
($17,500)
Withdrawal
$50,000
401(k)*
Net
Income
$42,500
Capital
Gains Tax
($7,500)
Withdrawal
$50,000
Mutual
Fund
DIVERSIFIED INCOME
Total Net Income
$97,500
Ordinary
Income Tax
($52,500)
Withdrawal
$150,000
401(k)*
NON-DIVERSIFIED INCOME
Get more money out of your retirement portfolio.
See the difference for yourself.
Non - Diversified $97,500
Diversified
$125,000
Hypothetical scenario assuming a withdrawal of $150,000 during a retirement year, 35% ordinary income tax, 15% capital gains tax and 0% permanent life insurance tax.
Diversifying the Taxation of Your Portfolio
Using a strategy that incorporates diversified income, like cash value from a permanent life insurance policy, could mean you’ll have more income in retirement.
/
1
2
Diversified
$125,000
Non - Diversified $97,500
*
/
1
2
The $150,000 withdrawal is post age 59 and pre-RMD age.
Soon
+
*
/
1
2
The $100,000 withdrawal is post age 59 and pre-RMD age.
tap to discover more
Later
+
Much Later
+
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Look at Life Differently
Diversifying the Taxation of Your Portfolio
A Closer Look at Each Asset Category
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