One of the most effective ways to fund a retirement plan for people in their 30's, 40's, or even 50's, is through indexed universal life insurance. The concept is to simply overfund a life insurance policy to accumulate significant cash value. The main advantages to using this vehicle to fund a retirement plan are the following:
1) Downside protection - Some IUL's guarantee a 3% return every year even if the market goes down and allow for returns up to 14% cap. This concept has allowed for historical average returns with many carriers of around 8% and guarantees that the portion of your premium allocated to your retirement fund will gain over time!
2) Tax free income-At retirement - You will have the option to take out annual tax free income! This is a huge benefit as most of us believe that taxes are very likely going to increase in the future. Let's assume that you are in a 30% tax bracket at retirement and your cash value accumulation allows you to take out a $70,000 tax free annual income. This would be the equivalent of $100,000 that you have to pay taxes on!!
3) Death benefit protection - All along the way, you will have permanent death benefit protection to take great care of your family in the event that something were to happen to you prematurely or later in life!!
The past decade has unquestionably altered the way in which we must view and approach retirement. Rocked by the events of 9/11 and then the recession, the stock market showed little net gain during the past 10 years, and many people saving for retirement have suffered lossed in both investments and home values. Couple that with the fact the government has been running a $1.3 trillion deficit, putting in question how we will continue to fund social security and medicare benefits. This creates much uneasiness regarding what tax burdens may look like during the distribution phase of retirement funds!
At the same time, the baby boomer generation, the largest in our country's history, is now moving into their retirement years, with many projected to live well into their 90's. More uncertainty arises from the fear that a retirement portfolio that would have been adequate or even comfortable 10 years ago will be unable to sustain a long retirement in today's economic and tax environment.
However, many Americans are proving to be adaptable and resourceful. They are willing to not only become more disciplined with their finances, but are looking hard at potential course-corrections that can get them back on the right track. They are understanding that now, more than ever, they need to seek professional guidance to create a path toward a successful, secure retirement! Don't try to navigate the waters by yourself. There are excellent options available if you look to the right sources! Be proactive in planning your retirement and don't assume that your company 401k is the best or only option!
The 2 main obstacles that I have witnessed in people's efforts (or lack thereof) in planning for retirement are lack of information (or misinformation) and procrastination. I believe that many avoid dealing with this issue because they view their retirement as very uncertain and possibly shaky.
However, the good news is there are some excellent options available to most people, including those with very limited expendable income. Most people are afraid to speak with an advisor for fear of being told that they need to come up with an additional sum of money that they simply cannot produce, or curtailing the lifestyle that they are comfortable living. However, a good advisor can look at the larger picture of a client's money pie and assist in reducing tax burdens and other unnecessary expenses. It is just a matter of taking the time to sit down with the right kind of advisor, one with your best interest in mind!
Finally, the best time to act is now. Timing is extremely important in retirement planning. Obviously, the younger you are, the longer your money can grow before retirement. However, if you are no longer in the spring chicken category, there still may be some great options for you unless you keep on waiting! As the saying goes, the best time to plant a tree was 10 years ago, the second best time is today!
Here are a few criteria in choosing an advisor or deciding if it might be time to FIRE your advisor or at least seek a second opinion:
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1) Your advisor should be in touch with you to offer a consultation and check up with you at least once a year. If this is not the case, rest assured that you are pretty low on his or her priority list. Do not assume that you are simply being left alone because your policies and accounts are in great shape and no improvements are available. A good advisor at the very least should touch base just to give you peace of mind and answer any questions you might have. So whether your advisor is helping you with insurance policies, financial planning, or both, you DESERVE to be contacted at least once a year. Things change so fast in the insurance and financial industries that you need to be updated consistently on what is going on.
2) Make sure that your advisor is a true broker and has access to the many different options that are available for you. It is his job to keep up with the product changes and best products on the market. Most insurance companies are strong with 1 or 2 products and not very competitive with the rest of their portfolio. And many companies that are great at recruiting agents and heavily penetrating the marketplace are not competitive with ANY of their products. If your advisor only works with 1 or 2 outfits it is a safe bet that there are MUCH better options available for you through a true broker. And beware, many of these agents that are limited to one outfit will POSE as brokers, telling their clientele that they have access to all options!
3) Nothing is more frustrating than needing an answer from an advisor and being unable to get a hold of them. If you can't get your advisor to call you back or it takes them a week to call you back, GET RID OF THEM! Either they are not very good at what they do or you are not a priority for them! In either scenario they do not deserve to be making commission from you and you deserve to be a priority!
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Marc & Ed