Advisor Today - July/August 2015 - (Page 30)

PRODUCT SPOTLIGHT LIFE INSURANCE By David E. Appel, CLU, CHFC, AEP Mitigating Retirement Risks with Life Insurance The right combination of life products and riders can help mitigate retirement risks. Here is how to structure them to benefit your clients. D o you remember the last market decline? It was the Great Recession of 2008. Do you know the year of the previous market decline-the one before the great recession? It was actually three years: 2000-2003. There have been five market declines in the last 30 years. The performance of assets in the years following retirement makes a significant difference in the longterm stability and longevity of assets during retirement. Prior to, retirement assets may have endured market increases and decreases. However, upon retirement, all those prior years no longer matter. In effect, it is like starting afresh with the assumption that there are enough assets to make it through retirement. However, a down market in those early years can strain aportfolio because it is "digging out" of a market drop at the same time as withdrawals are being made. The combined effect in those early years can have a lasting impact. Insurance's role in retirement planning It is well established that diversification is a cornerstone in setting up a retirement portfolio. Traditionally, advisors look at different equity types, capitalization and types of fixed income. However, life insurance has a critical role in retirement planning-even beyond the obvious. It's a financial asset with unique attributes and tax treatment. It's this unique set of characteristics that can make life insurance a cornerstone of overall planning to help meet and protect a retirement strategy. Here's how: * During working years, life insurance offers a death benefit that can protect a family and meet 30 ADVISOR TODAY | July/August 2015 © eelnosiva By taking selective withdrawals from life insurance only in years that follow a down market, one can avoid selling into losses. retirement-funding goals even if the individual is not around to contribute. * Life insurance cash values have the potential to grow tax free, and if properly accessed, they can be received tax free through withdrawals and loans. This offers a tax-free source of funds for retirement. Be mindful that these withdrawals and loans do reduce the death benefit. * Life insurance can offer cashvalue accumulation with downside protection. A product such as Indexed Universal Life insurance can provide participation in part of a market's upside but protects downside risk. In a traditional Universal Life policy, values can vary based upon the fluctuation of interest rates. Whole life can offer a guaranteed return with no downside risk. Further, some carriers' general accounts are almost completely uncorrelated to the market (with investments that may include agriculture, timber and real estate), and thus offer terrific portfolio diversification. * And here is the best part: Cashvalue life insurance can do MORE than just provide a source of funding for retirement and protection for loved ones. By strategically timing loans and withdrawals from a cash value life insurance policy, an individual can avoid selling into, and locking in, losses in traditional retirement assets. For example, Marcus is 65 and planning to retire. He has accumulated $1 million toward his retirement goal in an IRA. He needs an annual income of pre-tax $100,000 during retirement, and he has little income from other sources ($20,000 per year from Social Security and a pension of $10,000 per year).

Table of Contents for the Digital Edition of Advisor Today - July/August 2015

From The Editor
New Products
How Do You Create the Million-Dollar-Plus Practice?
Traits of Top Performers
The Business Benefits of a Pipeline Mentality
What Does It Mean to Act Ethically?
Variable Universal Life is Back
Sell More LTCI By Selling Less!
Overcoming the Most Common DI Objections
Divorce DI
Mitigating Retirement Risks with Life Insurance
Creating Irreplaceable Capital
Closing the Gap
Financial Future Less than Rosy for Boomers and GenX
Estate Planning and Annuities?
Ignite Your Sales Potential
A Closer Look at BTID
Upholding the Tradition
NAIFA’s Candidates for Election
Addicted to Rejection
What is Keeping Your Senior Clients Up At Night?
Advertiser Index
Back Page

Advisor Today - July/August 2015