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Retirement, that day in your life when you can tell your boss to “Take This Job and Shove it.” Many look forward to that day with glee, but other look towards retirement with fear, anxiety, and hesitation. Will I have enough money to live on? What if my retirement investments take a nose dive the day I decide to retire? What if I outlive my money? There are many factors to consider when thinking about retirement. Regardless if retirement is 30 years away or within the next 5 years we all have to consider our game plan and how it will work.

There are many tactics and solutions to the retirement dilemma. We personally like to help educate clients on options that offer guarantees. The last thing we want to see is someone that has to go back to work because their current plan didn’t work as planned.

We would like to present to you several papers written by respected financial industry professionals:

Permission to Spend

Permission to Spend, How To Spend Your Principle, Save a Fortune on Taxes, Increase Your Cash Flow… and Never Run Out of Money!

This easy to read paper by noted author and long time financial advisor Kim Butler spells out the idea that you can use your whole life insurance as part of a retirement supplement to allow you to spend your dollars and still be able to leave an inheritance to your heirs.

The story of John and Carol and how the learned about integrating this powerful financial strategy to save on taxes, increase cash flow and most importantly protect their retirement from market risks. This paper uses financial calculators from a company called Truth Concepts. These financial calculators let clients understand how the math really works.

Download the article, Permission to Spend by Kim Butler

Integrating Whole Life Insurance into a Retirement Income Plan

The White Paper, Integrating Whole Life Insurance into a Retirement Income Plan Wade D. Pfau, Ph.D., CFA and Michael Finke, Ph.D., CFP is a great pdf explaining their finding when testing many current portfolios for risk. While we always want to maximize earnings, we still must take into account risk of market losses. Even typical planners recommend reducing market exposure as one gets closer to retirement by purchasing bonds. A typical asset allocation pre-retirement would be 60% stocks and 40% bonds and as retirement approaches increasing bonds and decreasing equities.

We believe that purchasing a properly designed Whole Life insurance policy that builds cash value over time is a great replacement for the bond portion of a retirement plan. Life Insurance companies as masters at managing bond portfolios for long term risks.

Whole Life Insurance Cash Value is not exposed to interest rate risk and capital losses. Thus, it can be viewed as a buffer asset, and buffer assets can be useful to a retiree. We can indeed conclude that an
integrated approach is a more efficient retirement income strategy

Reducing sequence of returns risk.

Sequence risk is the danger that the timing of withdrawals from a retirement account will have a negative impact on the overall rate of return available to the investor. This can have a significant impact on a retiree who depends on the income from a lifetime of investing and is no longer contributing new capital that could offset losses. Sequence risk is also called sequence-of-returns risk. *Investopedia

Buy using cash value in you a whole life insurance policy, a retiree can use those funds on years when the investment portfolio is down as to not lock in losses, which are compounded when one has to take withdraws on down years. In the past many money managers and advisors would tout the 4% rule, saying that one can safely withdraw their investments and never run out of money. In the low interest rate years of recent, that 4% rule has been deemed to be too risky for most people. The white paper covers several scenarios to help people understand how this would work in their particular situation.

Case study: 35-year-olds Steve and Susie:

  • Scenario 1: Investments and term life insurance
  • Scenario 2: Investments, single-life income annuity, and whole life insurance
  • Scenario 3: Investments and whole life insurance with full volatility buffer
  • Scenario 4: Investments, annuity, and whole life insurance with limited volatility buffer

There is a great chart that poses the outcomes of each of these scenarios. Want to guess which one wins?

What about someone in their 50’s is this strategy too late to implement? Take a look and see for yourself. Download the white paper Integrating Whole Life Insurance into a Retirement Income Plan

For most people “saving” for retirement means investing in a company sponsored retirement plan. This could be a 401K, Roth 401k, a 403b or a 457 plan. It may also involve using Individual retirement accounts as well as other investments like real estate or business ownership. We believe in an integrated approach. We at Dynasty Wealth Partners are not against investing in these types of plans. We do believe that most people should consider all aspects of retirement planning. Many “typical” financial advisors do a decent job at getting you to your retirement goals, but when someone stops working, then what? You’ve had a steady cash flow from your job every month, now you have to learn how to manage an investment portfolio to get yourself through retirement. We would be happy to help you or answer any questions you may have about having a retirement plan that is safe and will work for you regardless of what happens in the stock market.

Get in touch with us by setting up an appointment or contacting us here: dynastywealthpartners.com/contact/