Mr. Smith was a successful business owner but had invested most of his money in his business rather than saving money for his retirement. At 50 years old, he realized that he needed to start planning for retirement, but was he too late?
Mr. Smith, Business Owner
In working with his financial advisor, Mr. Smith took into consideration several pre-tax and after-tax strategies, ultimately deciding that he would prefer to receive retirement distributions tax-free. Mr. Smith chose a life insurance strategy that would offer him all of the tax efficiencies of a Roth IRA, with none of the limitations on income or contribution amounts.
Permanent Life Insurance
Not all permanent life insurance policies are the same, and each policy is subject to its own unique terms and conditions. Mr. Smith was working with an independent financial advisor with access to dozens of policies from different insurance companies, not a captive insurance agent with access to only one company’s products.
Mr. Smith examined several cash value life insurance options presented to him by his advisor which each offered him the best cash distribution potential for his retirement goal in 15 years, along with other features. He chose an Indexed Universal Life (IUL) policy.*
Based on Mr. Smith’s goals and objectives, including retiring at age 65, it was determined that $5,000 a month ($60K a year) was an ideal contribution amount for him to allocate to the life insurance plan.
Furthermore, this particular IUL solution also offered additional living benefits if he developed a chronic illness, along with a $2 million death benefit left to his son if something happened to Mr. Smith pre- or post-retirement.
Premium amounts, limits and coverage amounts were flexible and subject to change if needed if for some reason Mr. Smith had a difficult year—or an unusually successful year—and needed to pay less (or more) per month into the policy.
Indexed Universal Life Solution
As Mr. Smith’s retirement solution, he and his financial advisor utilized an IUL policy that was projected to distribute over $10,000 a month in 15 years after his contributions of $5,000 a month ($60K a year).
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MALE, AGE 50
$5,000 per month into an IUL 15 years of contributions
RETIREMENT AGE, 65
Projected $10,000 per month tax-free** income
Plus, over $2 million tax-free death benefit, tax-free living benefits for chronic illness. Flexible plan with premium amounts, limits and coverage amounts able to change if needed.
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It’s easy to find out how life insurance might work for you. Call Richard Ngin at Foundation Asset Management in Costa Mesa, California at (626) 825-8044.
* “Consumers love indexed universal life, a love affair that remained strong in the fourth quarter 2022, according to Wink’s Sales & Market Report”: https://insurancenewsnet.com/innarticle/indexed-universal-life-drives-strong-2022-sales-wink-reports
** Life insurance policies are tax-free in most cases, but exceptions such as trusts named as beneficiaries may be subject to different tax rules.
The information in this article is for general purposes only and is not to be construed as tax or investing advice. We recommend that you work in conjunction with your tax professional, attorney and/or financial professional before implementing any specific recommendations related to your retirement based on your unique situation.
The premium rates and policy projected amounts used in this example are estimates and may vary based on a person’s unique circumstances.
IUL policies are credited interest based on contract terms but are not actually invested in the stock market; they are not subject to market risk like variable life policies. Life insurance guarantees are provided by life insurance carriers and are based on their financial strength and claims-paying ability.
Terms are subject to each individual life insurance contract, and medical underwriting may be required.
