Funding Source – Qualified Money

If you were able to catch the most recent release of our full LTC Coffee Break earlier this week, you will recall that Michael and I discuss using qualified money to fund Asset Care. If you missed it, you can go to the LTC Coffee Break website at LTCcoffeebreak.com or just CLICK HERE to begin viewing the video.

When we are talking about using qualified money as a funding source, we are talking about using proceeds from an IRA, 401(k), or 403(b). Roth IRA and 401(k) plans do not fit the mold for this solution.

Remember, with Roth accounts, the withdrawals are not taxed while with a traditional IRA those distributions will be taxed. Also remember, the pre-59 1/2 distributions from traditional qualified plans are typically subject to a penalty on top of the taxes that must be paid at distribution. If you are looking for a quick comparison, I found this one T. Rowe Price to be quite useful.

Another qualified money funding opportunity occurs when a non-spouse beneficiary inherits qualified money. The SECURE Act effectively eliminated the “Stretch IRA” by requiring the proceeds from inherited IRAs to be fully distributed within 10 years. For a decent review of the SECURE Act provisions, this Fidelity article does a good job.

One strategy that I have been asked about often with regards to using qualified money in the strategy is using IRS Rule 72(t) which eliminates penalties from distributions prior to the age of 59 1/2. The issue that we have is that our qualified money funding strategy and the 72(t) language do not align.

Those are the basics for what qualified money we can accommodate in our Asset Care funding strategy.

Sure, some people will say “that’s a non-starter” and “that’s just a funding scheme, anyone can do that”. Well, if anyone can do it, why is OneAmerica the only carrier that offers a turn-key funding solution for qualified money?

I didn’t say that the OneAmerica strategy is the only way to go, but it is the only turn-key solution.

Next week, I will share another insight into using qualified money to fund Asset Care.