For the past 25 years, agents and their clients have been attracted to the idea of accumulating cash in life insurance. They love the concept, but the discipline to save, the distraction of buying term and investing the difference in premium cost, and the convenience of 401(k) plans have worked to minimize sales results. Things change. Our recent recession was a wake-up call to many 40 and 50 year olds who are setting new priorities in order to save more for the future and provide safety for those dollars.
If your clients or your clients' grown children or grandchildren are successful in creating income and care about their financial futures, then you should begin a new discussion and a review of their plans with them. Chances are, they still have a need for life insurance in addition to a need to save more to accomplish their goals. Now is the perfect time to introduce the power of life insurance in creating supplemental retirement income to them.
In recent years, the most successful agents have introduced this key concept and asked questions to connect their prospects and clients to the opportunity. One of Creative's top producers, Mark Roberts of Overland Park, Kansas, introduces three tax strategies to his prospects/clients: taxable, tax-deferred, and tax-free. Most people are very familiar with taxable assets, which include regular savings and other taxable investments like mutual funds. They are most likely familiar with the second strategy, tax-deferred, as it contains 401(k), IRAs, 403(b), and other tax advantaged savings plans. The third strategy, tax-free, typically includes Roth IRAs and municipal bonds. This strategy also includes life insurance policies. Introducing a special type of life insurance is an exceptional -- although often-overlooked -- opportunity to create a tax-free source of income.
Regardless of the method you choose to assess your clients' financial positions, it appears obvious that in the future, some form of supplemental income will be a critical component to a successful retirement plan. Many employers are no longer providing lifetime pensions for their employees. Instead, offering 401(k)s as the savings vehicle of choice has become a standard practice for them. Unfortunately, many employees do not take advantage of the opportunities 401(k) programs offer, or life gets in the way of their ability to participate in this type of planned personal savings. Marriage, mortgage payments, children, educational expenses, and a challenged economy with rising fixed costs of living all contribute to the failure of wage earners to put away enough money for the retirement they envision someday. As an advisor, you counsel clients on the need for life insurance to protect families from loss of income due to premature death. Doesn't it also make sense to educate them on the advantages of combining a personal retirement plan with their protection program to produce a tax-free supplemental income for their non-working years?
When a client's focus is on creating living benefits by building cash value in life insurance, your discussion may change from minimizing a commodity type expense, such as term insurance, to maximizing tax-free cash accumulation for future retirement income. Help your clients consider creating supplemental retirement income on a tax-favored basis with a properly structured indexed universal life insurance policy. This type of structure maximizes the amount of cash allowed by federal regulations to fund a life insurance policy, while maintaining the special tax treatment that is a major benefit of the permanent life insurance policy. An indexing feature on such a policy provides an opportunity for earnings that exceeds those of traditional fixed universal life plans while exposing the client to no direct downside market risk. And best of all, the cash value within the policy can be used as an emergency fund for unexpected expenses during the accumulation years, as well as income during retirement on a tax-free basis.
There are over 35 carriers offering indexed life products currently available in the marketplace. Those products offer a variety of indices, allowing your clients to choose the strategy that best fits their personal style and preference. A number of riders are also available within those products which serve to enhance an already powerful story. The most popular of these riders is one that makes a portion of the death benefit available for use if the insured receives a terminal illness diagnosis. Some carriers take this rider a step further and allow death benefit acceleration for confined care in a nursing home, or in some instances for home health care.
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