written by reader Mark Skousen’s – 19 trillion dollar bombshell, IRA Reboot

By dheld2, January 13, 2017

Anyone know what this strategy is?

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Todd
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Todd
March 15, 2017 3:16 am

I am doing a bit of speculation, dheld2, but here is my thinking …

I believe Skousen’s IRA reboot is a strategy to convert an IRA into a specific type of annuity, attached to a life insurance policy. This kind of conversion can be done tax-free.

Most withdrawals from such an annuity would ordinarily be taxable at ordinary tax rates when the withdrawals are made. However, it sounds like the sort of annuity Skousen favors allows borrowing against its principle, and such a loan would be tax free. It would, however, have to be repaid upon the death of the annuity owner, from his/her estate or perhaps the proceeds of the life insurance policy. While the beneficiaries of that insurance policy would receive any remaining amount of insurance value, any remaining principle from the original IRA would be the property of the insurance company providing the annuity.

The whole strategy sounds to me like it has a hole in it somewhere. For starters, if the annuity owner winds up living a very long time, s/he may wind up borrowing all of the principle to cover monthly living expenses well before dying, and thereafter would suffer a big reduction in monthly income. Also, Skousen’s advertising literature suggests that one can purchase an annuity promising a return equal to the change in the S&P 500 on days when it rises, but that never goes below zero on days when the S&P 500 falls. It’s beyond me how an insurer could offer such an annuity and stay in business over the long haul.

I could always be wrong, but I’m dubious about Skousen’s strategy working for most people. If you read articles online from reputable sources about converting an IRA to an annuity, nobody else seems to suggest you can use this practice to avoid income taxes. Given the administrators at the Internal Revenue Service are no dummies, it also seems unlikely they wouldn’t have plugged a hole in the tax code like this … or else we’d be hearing the idea recommended by lots of people other than Skousen.

That’s my two cents … it’ll be interesting to see if there are any contrary opinions.

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Jim
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Jim
November 8, 2017 8:18 pm
Reply to  Todd

Annuities are just about the most illiquid way you can lock up your money. These are profitable to the sellers, not the consumers.

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Todd
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Todd
March 15, 2017 3:24 am

Addendum – after my first post, I found a two-minute video describing Skousen’s strategy, offering a couple of details he does not supply. (Plus at the end, a lot of rapidly-scrolling legalize laying out the risks.) The provider of this video is selling the sort of annuity Skousen describes … even calling it an IRA Reboot just like he does.

If you are interested, the video is at http://wealthpreservationllc.com/can-ira-reboot-net-retirement-savings/ .

If you pursue this further, listen to the insurance company objectively … but I’d suggest keeping in the back of your mind that the primary goal of an insurance company is to take some of your money, and that they succeed with more people than not.

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H L Quist
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H L Quist
March 25, 2017 6:23 pm

I don’t understand Skousen’s claim that there’s a 35% or 50 % tax due on Q plan distributions starting in 2017 under TEFRA. Your opinion.

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