Why Life insurance in retirement? Money is now at work in retirement rather than people at work so you can not leave this to chance. It is extremely hard for an asset to generate income and be a legacy tool at the same time. This puts a lot of stress on your money.
Problems with traditional strategies without whole life or permanent life insurance:
Inflation: Reduces buying the power of our dollars over time.
Outliving Money: Need to make sure our money lasts throughout lifetime
Tax Law Changes: Tax increases reduce the spending power of income.
Volatility of Returns: Market fluctuations can negatively impact an investor's net returns and thus reduce future spending power.
Loss of Principal: Market fluctuations, unforeseen needs, or other unknowns can reduce the total value of your account.
Lifestyle Changes: Technological change, planned obsolescence, and standard of living increases.
Asset Insurance...Whole life or permanent life insurance in retirement will give you a permission slip to spend another asset without the fear of running out of money, maximize retirement income, and still leave a significant legacy to heirs and charity. The idea is to spend and enjoy wealth without sacrificing lifestyle and protecting wealth erosion.
An asset and income maximizing strategy utilizes permanent life insurance combined with accumulated assets to provide these benefits:
1. Paydown vs Interest Only: Enhance your lifestyle by spending more of your wealth
2. Reduce pressure on capital: Less capital needed to produce desired retirement lifestyle
3. Reduce pressure of withdrawal rates: Less reliance on traditional methodologies such as Monte Carlo, and less worrying about market fluctuations
4. Reduce income Risks: Less volatile assets can be used to produce more stable income
5. Reduce Risk of Tax Increase Impact: Reduce impact of tax increases through asset paydowns, charitable giving, and other integrated strategies
6. Reduce taxes: deferred growth of cash values, tax-preferred loans, and tax-free distribution at death
7. Additional Income: Create additional income through dividends, cash value, or loans depending on policy type, or through other asset and income maximization
8. Inflation protection: Reduce the effect of long-term inflation by increasing expected retirement income
9. Reduce Fear: Reduce fear of running out of money
10. Capital Opportunites: Have the flexibility to use capital for opportunities that do not create immediate income
THE TAKEAWAY
-Income distribution strategies are very important
-Fixed income saving strategies should be avoided because wealth eroding factors diminish lifestyle over time
-Coordinating multiple elements boosts advantages and limits disadvantages
-Coupling retirement assets with whole life insurance offers an opportunity to optimize retirement income and legacy
