Managing Retirement By Other Means

The US economy has been beset with low interest rate performance for nearly a decade. While politicians and other policymakers debate how to energize the performance of the economy, people trying to plan for retirement are plagued by the spotty performance of market investments. Adding to the cliffhanger characteristics of retirement fund results, is the knowledge that use of either 401Ks or IRAs will eventually lead to a tax burden when those funds begin to be distributed.

Trying to figure out when lighting will strike the markets and deliver solid double digit growth is a risky strategy. Even during relatively energetic markets, as we have generally had for several months, there are many, many pockets of lackluster performance to go along with the flashy gains in other segments. No one wants to experience the dramatic losses that have occurred during the two major bull market episodes in less than twenty years. 

After all, when each of us makes the decision to retire from active earning, the next paycheck will be signed by us. So, what other methods can we use to protect earnings and have those funds available for our lives after our day of retirement?

How would you like the means to protect your retirement assets from market volatility, reduce the load of taxation and uncertainty on your retirement distributions, and also provide a funding mechanism for your estate plans and trusts? Could the same thing be used to provide a lump sum in the event of a terminal diagnosis that could be used prior to your death? A fund to pay for extended care costs in the event of a chronic illness?  Help fund a child or grandchild’s education, or provide a fund that they can use for their benefit once they strike out on their own — to buy a home, or start a business? Something that offers you tools to help you through life’s journey?

A good retirement plan can use the variety of tools provided with a modern whole life insurance policy, along with other financial tools, to provide powerful protection and protection from the bumpy roads that we often have in life.

Quick question? Do you think taxes will go up, down, or stay the same during your lifetime? I’ve always like the story about Ronald Reagan during his acting days. It is told that the reason he limited the number of movies he made each year, and hence his income, was to avoid the extremely high marginal tax rates if he earned over about $200,000 per year (a bit over $2.5 million in today’s dollars).

Another question? Are you always going to receive a 5% return on your investments in the market over a 20-30 year career? Is it likely that at some points, the market will turn downward, forcing on you the need to grow back to previous levels of value — how many years can that take, and what opportunities for wealth accumulation have been lost during that time frame.

I think most agree that reasonable diversification in saving for retirement is wise. So….in considering how a cash value life insurance policy can be used to your benefit, think about this::

• Premiums get paid with after tax dollars, at your current marginal tax rate;

• Cash value accumulates, tax-deferred;

• Policy value can be accessed on a tax free basis, in most cases, using withdrawals or a policy loan vehicle;

• Funding is not limited based on income;

• There is no tax penalty for withdrawals made before age 59½; 

• No required minimum distributions — you decide when you take distributions;

• There may be creditor protection, depending on state laws

• Cash value can be used to supplement returns from equity investments distributions during a down year, or to achieve a lower tax obligation;

A cash value policy, which can be crafted to achieve these sorts of goals can be used for nearly all ages. It can be a valuable additional tool in the planning of your retirement income. Call me for more details, including real life illustrations on how this asset can be used to achieve your goals.