CRT's for Retirement
What's the most important
economic consideration for retirement? CASH FLOW!
What's the #1 obstacle to building wealth? TAXATION!!
Future cash flow comes from your investment performance
during your working years and taxation erodes investment results faster than
any other item. When you add up the impact of taxation it staggers the
imagination.
Example: 2 doctors
decide to save $10,000 each and every year from 1976 to 1994 (their ages 45 to
65). Both invest these systematic savings in Fidelity's Magellan Fund. The
actual historical results are somewhat overstated for Dr. B. because we
utilized today's tax rates which are more favorable than tax rates prior to
1986. Dr. A utilized a charitable retirement plan and thus defers all taxation
until the cash flow begins to come out at age 65. Dr. B, however, pays taxes as
he goes along — results:
Dr.
Savings $3.3 Mil $2.0 Mil
Retirement
Cash
Flow $330,000 $200,000
Dr. A has literally 60% more cash flow — yet both invested in
the same thing. Think about it, Dr. A has $130,000 more cash flow each and
every year.
Why pay taxes on money you're not going to spend? As you can see, charitable retirement plans have at least one significant benefit — more cash flow.