FINANCIALLY
Speaking
Get Back
Down The
Retirement
Mountain
L
ast week, I had a retirement planning
meeting with a client who brought her
friend, “Mary” along to meet me. “Mary”
was concerned that she might not be doing
enough to ensure a comfortable retirement and
my client thought that I could be of great help
to her.
Although permanent life insurance does
not typically come to mind when creating a
retirement plan strategy, we started our meeting
talking about why perhaps it should be. Often
people don’t realize that life insurance can be
much more than death benefit protection. The
cash value in a permanent policy accumulates and
can be borrowed without taxes, and the loan does
not have to be repaid*. This can have tremendous
value to your overall retirement plan by addressing
several common retirement challenges.
Longevity
What’s the goal in climbing a mountain? The right
answer is not to reach the top but rather to make
it safely back down the mountain. Retirement
planning is similar to mountain climbing in that
the main focus is often on building retirement
assets rather than planning how to get down the
“retirement” mountain without running out of
money. Creating a retirement spending strategy
can help ensure that your money lasts as long as
you do. Permanent life insurance can be another
source of income in retirement. In addition, you
will have a tax-free death benefit to leave for your
loved ones.
Diversification
Jeffrey M. Orth is a
Chartered Financial
Consultant, a Certified
Advisor in Senior Living,
and an Investment Advisor
Representative, with over
15 years experience as
a business and personal
planning, insurance,
and wealth management
specialist Jeff is available
for group lectures and
private consultations. Visit
ifitfinancial.com or call
408.842.2716.
1196521RM-May17
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In addition to diversifying your retirement assets,
it is also important to have several options for
retirement income. Life insurance provides an
additional option to supplement conventional
sources of retirement income like 401(k), IRAs
social security, etc. The difference with life
insurance is the potential to quickly and easily
access tax-free retirement income. The life
insurance option can help avoid other alternatives,
such as having to get a bank loan, or locking in
losses in an investment account if the market
values are currently down, or facing potential
tax penalties in order to get quick access. The
flexibility of a tax-free loan and/or withdrawal
against your life insurance can be a great option,
no matter what the future holds.
Volatility
In retirement, a common problem when taking
income withdrawals, is earnings volatility. For
example, if you withdraw 3% in a year when
the market is down say 10%, then you have
lost 13% of your money. But if you have a
permanent life insurance policy as part of your
retirement plan, you have the option to stop
taking withdrawals from your brokerage account
or retirement account when the market is down,
giving it a chance to recover**. Having the option
to access the cash value in your life insurance
as supplemental retirement income can act as a
cushion against volatility.
Conservation
Many people save a significant portion saved for
their retirement in 401(k)s and IRAs. They are
often reluctant to use this source for retirement
income, fearing the money could run out or
perhaps they decide they want to leave a sizeable
amount to loved ones and charities. There is
also the chance that a spouse with a long-term
terminal illness could decimate a couple’s savings.
Life insurance can create another option that is
separate from your other retirement plan assets.
Life insurance will give you the peace of mind that
spent-down assets will be replaced for survivor
retirement needs, or passed to loved ones in a
tax-efficient way.
Social Security
Social Security is the only guaranteed source of
retirement income for many retirees, yet money is
constantly left on the table as many do not know
how to maximize their benefits. Often, retirees
don’t realize that the age you begin taking social
security impacts the amount of lifetime benefits.
Creating a retirement income strategy using the
cash value in a life insurance policy to supplement
income while delaying social security, can translate
into thousands of dollars in additional retirement
income over a 30-year retirement.
Permanent life insurance provides options for
retirement in an uncertain world by providing
both death benefit protection and cash value to
use as needed.
The initial retirement planning meeting with
“Mary” actually turned into few meetings, and
as a result of our conversations and planning, we
were able to develop a strategy that “Mary” felt
substantially improved her retirement plan and
gave her peace of mind that she will be able to
successfully ‘get down the retirement mountain’.
You might also feel better about your own
retirement plan if you had a similar conversation
with a capable financial advisor.
*As long as premiums are paid and the policy does not lapse. Assumes contract is not a modified endowment contract under IRC 7702A.
**IRA owners over age 70½ must take minimum distributions and do not have the option of not taking withdrawals.
GILROY • MORGAN HILL • SAN MARTIN
JULY / AUGUST 2015
gmhtoday.com