A Great Idea That Keeps Getting Better . . . and Stronger . . . and Easier! Life Insurance Retirement Plan
For life insurance industry veterans, using cash value life insurance to supplement retirement savings is as old as the rate book. Overfunding premiums and enjoying the advantages of both insurance protection and tax-free accumulation (without the burden of qualified plan rules) is what makes our products unique. And with the potential for tax-free income down the road, we really have an unmatched solution for clients wanting to enhance their retirement in a very tax-efficient way.
If life insurance is new to you, or if you just need a refresher on the LIfe Insurance Retirement Plan (LIRP) concept, then click here to review a primer on retirement planning with cash value life insurance. For the right high net worth client, a LIRP provides a compelling solution for those wanting to supplement their retirement and/or reposition taxable assets into tax-advantaged investments designed to provide both insurance and income.
The LIRP opportunity is now better than ever….but why?
Taxes
For the past several years, many of your clients have enjoyed the impact of lower taxes and increased disposable income. For those looking to park this "found money," a LIRP can provide an ideal planning strategy. This approach is even more powerful for clients who are concerned that tax rates will eventually return to higher levels, making a LIRP an even more attractive hedge against future taxes. Regardless, it's a rare client who enjoys paying tax whether the rate is low, high, fair or otherwise. And reducing the tax burden after retirement is a goal that all of your clients can relate to.
Products, products, products
Whatever the risk tolerance of your client the industry has a product to match. The consistent and dependable dividends of a whole life product, the upside potential and downside protection of Index Universal Life, or Variable Universal Life offering subaccounts across the risk spectrum, including fixed index options. For your ultra-high net worth clients, institutionally-priced Private Placement VUL. You and your clients are in control and can select a product and carrier that best fits their planning needs.
And there's more good news. Recent adjustments to the tax law governing life insurance premiums have created welcome changes for policy owners to put more money into cash accumulation plans, without running afoul of definition of life insurance and Modified Endowment Contract (MEC) limits. Paying more premium for lower death benefits can result in accelerated cash values and potentially lower overall insurance costs in your insurance contract. [See the Windsor Blog "IRC Section 7702 - Changes and Challenges" for more information}
Changing risk tolerance…protecting that income stream!
So your clients who have been funding their life insurance policy for 20 years have retired and stopped paying premiums. As they ease into a long and, hopefully, healthy retirement, that significant pot of money that's been growing tax-free looks very attractive. While the anticipation of tax-free income is exactly what they've planned for, the potential inconsistency of that income stream may create some heartburn as they proceed through their golden years. And if they live beyond life expectancy, depending on a regular and predictable source of income will likely become more important.
Today you can offer your clients riders and product features that can protect some of these risks. Long term care/Chronic illness riders can provide access to the death benefit during life if the insured needs care. Guaranteed Income riders "convert" the accumulated cash value to a de facto single premium immediate annuity, guaranteeing the income stream. Variable Universal Life products offer fixed index strategies that can protect downside risk during the income phase. Several carriers offer in force policy management tools that help you and your clients achieve the illustrated results.
Take Advantage of Streamlined Underwriting Programs
Although clients who decide to implement a LIRP need to have a legitimate life insurance need, they may be uncomfortable with a traditional/conventional underwriting process to get approved and move forward. With emphasis on accumulation, distribution, and tax planning, the client may simply not have the same mindset as if they were pursuing life insurance for pure protection needs. What may be perceived as a lengthy and intrusive means to an end just might result in the client losing their motivation. And if you as an advisor don't specialize in life insurance, the process might be as tiring for you as it is for your client. But over the past few years life (insurance) has become easier! Many carriers have rolled out "accelerated" or "non-medical" underwriting programs that make the underwriting process a more comfortable and much faster experience for the client. Clients today may not need to submit lab specimens, and risk would primarily be assessed by review of data points and a telephone or online interview. These programs are limited by variables such as face amount and age, but we're seeing these qualifications expand with carrier use of electronic health data/information. [See the Windsor Blog "New and Enhanced Underwriting Tools Impacting Your Cases Today"]
Putting it all together, today's financial environment is perfect for the products you know and sell. At Windsor, we know the products, the features, the companies and the underwriting that will fit your clients' needs and provide solutions and security for their future. Call us - we'll be happy to help with your client's life insurance and retirement income needs. There's no better time than right now!
Comments