Are defined benefit plans funded with life insurance an idea whose time has come?

By Roccy Defrancesco

The Wealth Preservation Institute


I read the most incredible advertisement by the Society of Financial Service Professionals (SFSP) last week. You know what the title was? "Defined Benefit Plans Funded with Life Insurance Products: An Idea Whose Time Has Come."

The SFSP apparently found an expert who convinced the Society that buying life insurance in a qualified plan is a good idea. The advertisement touted a webinar on June 30, 2010.

I really couldn't believe what I was reading, because I've written a handful of articles in the past where I showed specifically why buying life insurance in a qualified plan is a terrible idea. The last time wrote an article warning advisors about promoters touting the benefits of buying life insurance in a qualified plan was in 2007. Therefore, when I saw the SFSP advertisement for a Webinar on this topic, I figured I'd re-run that article and offer my own Webinar on this important subject matter.

It's my opinion that paying for a Webinar that will incorrectly tell you that buying life insurance in a qualified plan is a good idea is a waste of money. But that's a decision for you to make.

To read my 2007 article titled, "Should Clients Buy Life Insurance in 412(i) DB Plans to Increase the Deduction?"please click here.

What I'll tell you is that the sales pitch of buying life insurance in a qualified plan is fairly simple and somewhat powerful. If you buy life insurance in a defined benefit (cash balance, 412(e)3 (formerly 412(i)) plan, you can substantially increase the amount of money your clients can deduct annually into the plan.

However, even though you've helped clients increase the annual tax-deductible contribution to their retirement plans, you did not increase the amount of money they would receive in retirement. If you think about that for a second, you should scratch your head and wonder why someone would recommend life insurance in a qualified plan.

If you would like to learn the real-world sales pitch of buying life insurance in a qualified plan and why it's a bogus pitch, please read my 2007 article, where I explain the sales pitch and then explain with specific math, why it's no good. It will be an eye opener to many who haven't had a chance to read my thoughts on this sales concept.

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