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Forget 401K & IRA’s – You Can’t Retire Early With Those!

by BlogInsuranceLife insurance

There has been a trend of late, especially among Millennials and Generation Zs, they want to retire as early as possible. “I want to retire when I’m 40, 45, 50…” So, they are dumping as much money as they can into qualified plans mostly 401Ks with the hope they will have millions of dollars by the time they are 40 or 50 years old.

The one big problem with that… the 59 ½ rule.  This means that the minute you take a distribution from your qualified plan you are subject to a 10% early withdrawal penalty. Couple that with a normal withdrawal rate of 4%, you are taking out 14% a year. How sustainable is that?  To be able to accomplish this long-term is a huge stretch!

Is there a better alternative?

Why Consider Life Insurance as a Retirement Plan?

Life insurance has long been seen as a means to provide financial protection for loved ones in case of an untimely passing. However, it can also serve as a powerful tool for retirement planning. By leveraging the benefits of indexed universal life and whole life insurance, individuals can create a tax-exempt source of income while enjoying the flexibility of early retirement. (life insurance is not subject to the 10% early withdrawal penalty)

Benefits of Indexed Universal Life Insurance

Indexed universal life (IUL) insurance combines the benefits of a life insurance policy with the potential for accumulating cash values through the performance of linked indexes, such as the S&P 500. This unique feature allows policyholders to grow their policy’s cash value while enjoying protection against market downturns.

Here are some key benefits of using IUL as a retirement plan:

  1. Tax-Advantaged Growth: The cash value accumulation in IUL policies grows on a tax-deferred basis. This means that policyholders do not have to pay taxes on their cash value gains as long as the policy remains in force.
  2. Flexible Premiums: IUL policies offer flexibility in premium payments, allowing policyholders to adjust their contributions based on their financial situation. This gives individuals the freedom to allocate funds to their retirement plan without being constrained by fixed premium amounts.
  3. Death Benefit Protection: In addition to the cash value accumulation, IUL policies also provide a death benefit to the policyholder’s beneficiaries. This ensures that loved ones receive financial protection in the event of the policyholder’s passing.
  4. Upside Potential: IUL policies participate in market gains, allowing policyholders to enjoy the potential for higher returns compared to traditional life insurance policies. The cash value accumulation is linked to the performance of selected indexes, offering the opportunity for significant growth over time.

The Benefits of Whole Life Insurance

Whole life insurance is another type of permanent life insurance that can be utilized as a retirement plan. Here are some reasons why whole life insurance can be a valuable component of a retirement strategy:

  1. Lifetime Coverage: As the name suggests, whole life insurance provides coverage for the entire lifetime of the insured individual. This guarantees that life insurance protection will be available, regardless of age or health conditions.
  2. Cash Value Accumulation: Similar to IUL policies, whole life insurance policies build cash values over time. These cash values can be accessed during retirement to supplement income or cover any unexpected expenses.
  3. Dividend Payments: Many whole life insurance policies are eligible for dividends, which are a share of the insurance company’s profits. These dividends can be reinvested to enhance the policy’s cash value or received as cash payouts.
  4. Stable and Predictable: Whole life insurance offers stability and predictability, as the premiums and death benefits remain fixed for the duration of the policy. This allows individuals to plan for retirement with confidence, knowing that their life insurance will provide a steady source of income.

How to Leverage Life Insurance for Retirement Planning

Now that we understand the advantages of using life insurance as a retirement plan, let’s explore the steps and strategies involved in leveraging IUL and whole life insurance for a secure retirement.

Step 1: Evaluate Your Financial Situation

The first step in using life insurance as a retirement plan is to assess your current financial situation. Consider factors such as your age, health, income, and existing retirement accounts. This evaluation will help determine the optimal amount of life insurance coverage needed and the level of premium contributions you can afford.

Step 2: Determine Your Retirement Goals

Next, establish your retirement goals. Define the lifestyle you aspire to have during retirement and estimate the income required to support that lifestyle. Take into account factors like healthcare costs, inflation, and any outstanding debts or financial obligations.

Step 3: Consult with an Insurance Professional

Seek guidance from an experienced insurance professional who specializes in retirement planning. They can help analyze your needs, recommend suitable products, and design a customized plan that aligns with your retirement goals. An insurance professional can also assist in understanding the tax implications and withdrawal strategies associated with life insurance as well as how to properly structure it as a retirement plan.

In summary, life insurance can offer a secure and tax-advantaged retirement plan for individuals seeking financial stability and early retirement. By leveraging the benefits of indexed universal life and whole life insurance, individuals can protect their loved ones while building a cash value that can be used to supplement retiree income.

Remember, creating a successful retirement plan requires careful evaluation of your financial situation, clear retirement goals, and consultation with an experienced insurance professional. With the right strategy and guidance, life insurance can serve as an effective tool to achieve a comfortable and financially secure retirement. Reach out to us at Her Retirement to get connected with an insurance expert: retire@herretirement.com.

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How to Evaluate Life Insurance Needs in Your 60s and 70s

by BlogLife insuranceWealth

The older we get, the more acutely aware we become of human mortality. And as we age, we often think more often of how we can help protect our family members in the case of an untimely death. Life insurance is different from other types of insurance — such as car insurance and health insurance — in that you most likely hope your family will never have to make use of it. However, since death is an inevitable part of life, chances are, your policy will not be purchased in vain.

According to a report published by Atidot — an insurance technology company providing AI, big data and predictive analytics tools for the life insurance industry — many people with life insurance policies are actually underinsured, with only about 30 percent of total coverage needs being met, leaving approximately 70 percent of unmet potential coverage.1Additionally, LIMRA’s 2018 Insurance Barometer Study found that about one in five people who have life insurance say they do not have enough.2 If you’re in your 60s or 70s, there are a variety of things to consider when evaluating your life insurance needs.

Am I Too Old for Life Insurance?

From mortgages to home repairs, there are many expenses your spouse could incur in the event of your passing. By purchasing a life insurance policy, you’re providing both you and your family with peace of mind knowing that these expenses will not lead to the loss of a house or more. A common belief about life insurance is that it’s expensive, especially if purchased later in life. However, as you get into your 60s and 70s, you may not need as substantial a policy, since your spouse may also not have as many years of living left to cover financially.

When considering whether or not you should get life insurance, it’s important to evaluate how many people rely on you for financial support, as well as how much that support entails. If your spouse doesn’t work or only works part-time, then they will most likely require additional income in the event of your passing. In a case like this, getting a life insurance policy is highly recommended if you want to make sure your partner is protected from excessive financial stress after you’re gone.

For people with estates very large estates, it’s often recommended to get permanent life insurance to minimize your estate taxes. Other people choose to fund their retirement with the cash value of their permanent life insurance. If this is your plan, then you’ll, of course, want to purchase a policy.

Life Insurance and Your Health Status

Typically, the older you are, the more expensive your life insurance quote is going to be. This is in part due to the fact that the older you are, the more health problems you could have. In some cases, you may be better off investing your money instead. If you’re in good health, it may make more sense for you to get a shorter term policy. For those with health problems, you may want to consider getting guaranteed issue life insurance, which anyone can get regardless of any health issues they may have.

Renewing and Extending Your Life Insurance Policy

While you may have bought a policy years ago, if you have a term policy, you may want to consider extending your coverage if you are aren’t able to cover retirement costs with pensions and savings. You can do this by either renewing your current policy or converting it to whole life insurance. If you choose to renew, it’s important to note that your premium could increase, and some companies may not even allow you to renew depending on how old you are.

What to Do Next

Regardless of your age, it’s always recommended to consult with a financial professional who can evaluate your individual situation and needs to determine whether or not life insurance makes sense for you. If a policy is recommended, they can help make sure you choose the type of life insurance that offers the most benefits for both you and your family.

  1. https://www.atidot.com/under-insurance-report-2018
  2. https://www.limra.com/barometer/
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
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Insurance Coverage and the Coronavirus

by BlogCoronaInsuranceLife insuranceUncategorizedWealth

The coronavirus pandemic has caused many people to re-assess their need for life insurance, along with other types of insurance such as long term care insurance and the adequacy of their health insurance.

Life insurance ensures surviving family members are provided for financially after someone’s death. There have been some changes in the application process for life insurance policies, and the good news is it’s still possible to get a policy.

In some ways it may actually be an easier process. According to Bankrate, “Because many people (and insurance companies) are honoring the CDC’s social distancing guidelines, in-person blood or urine tests and weigh-ins aren’t possible now. That means insurance companies currently have fewer potential reasons to reject applicants for coverage.”

“To make it easier for consumers to apply for a policy under these unusual circumstances, more than a quarter of U.S. life insurers have expanded their automated underwriting practices,” says Catherine Theroux, director of public relations for LIMRA. “One in 5 U.S. companies have postponed or waived paramedical requirements.”

Folks applying for life insurance however, are still required to provide a complete health history, allowing the company to analyze the insurability of the individual.

Some insurance companies are changing their offerings and limiting their coverage options based on age or the term of the coverage sought. For example, Mutual of Omaha Insurance and Penn Mutual Life Insurance have temporarily suspended applications for individuals aged 70 or older. Some other insurers are also temporarily suspending life policy applications for people in their 60s who might previously have been approved for coverage despite health issues like diabetes and asthma.

We believe that now is actually a good time to apply for life insurance, because it might possibly be the easiest process from an underwriting standpoint. If you believe a life insurance policy will protect you and your family, there really isn’t any reason not to apply now. Our insurance experts can help find the company that best meets your needs.

What about an existing policy and coronavirus coverage?

For the most part, existing policies will cover a person if they were to die from COVID-19. As long as your policy is in good standing, it will provide a death benefit to your beneficiaries. Just be sure not to let your current policy lapse. However, here’s a few exceptions to keep in mind:

  • The life insurance industry has something called a “contestability period,” a window of one or two years during which an insurer can investigate and deny claims. If it’s determined that the insured lied on their application or otherwise misled the insurer to defraud them, coverage — in the case of life insurance, the death benefit paid to the family — may be denied.
  • Another exception to a payout due to the coronavirus is for those who have purchased an accidental death policy. Those policies generally don’t cover death by disease. There are some exceptions, though, like if an injury causes someone to be hospitalized and the disease results directly from that hospitalization. It’s wise to discuss the specifics with your insurance agent.

If you’ve been honest on your application and current on your premium payments, you shouldn’t have any worries.

If you’d like to read more FAQs about life insurance, long term care insurance, healthcare or more, check out this article from AARP.

If you’d like to chat with a life insurance expert to analyze your life insurance (or long term care insurance) needs, talk to a RetireMentor to discuss your specific needs.