Part 1 in a two-part series
Reason One: Seniors purchase life insurance to pass more money to their spouse, heirs, or a favorite charity.
Typical financial advice goes something like this: “You won’t need life insurance once your children are grown.” That advice leads people to think that term insurance is the only option when protecting their family from financial ruin should they die too soon.
Yet, reality sets in when there are no longer any children and they wish they had saved more. Many seniors are searching for ways to leave a legacy without sacrificing savings or investments that are needed to live on. They are also looking for strategies to leave more to loved ones and causes they care about and less to the IRS!
Life insurance is an ideal strategy to provide tax-free income and the most efficient way to leave tax-free money for a surviving spouse, child, partner, or even a sibling. Most do not realize that qualified plans when distributed are taxable and can cause the beneficiaries tax issues.
The death benefit can paid in a lump sum or can be paid for a lifetime. This provides a safe and guaranteed future income for the spouse, children, grandchildren or charities.
Reason Two: The whole life policy can make the premium do the work of three benefits: financial opportunities, long-term care expenses, and life insurance.
Many people do not purchase long-term care insurance because they think they will never use it or they believe it is too expensive.
But, with the proper life insurance riders, the dollars are used more efficiently, providing multiple protections! Long-term care riders are also being offered that allow the insured to use a significant portion of their own death benefit for long-term care expenses after waiting periods are satisfied – at zero cost! If long-term care is not needed, it was part of the life insurance.
Life insurance companies also offer special riders that allow the insured to convert a portion of their death benefit into living benefits, should they be diagnosed with a terminal disease or even a serious or chronic illness. The client has different types of coverage in one cost-efficient policy.
Reason Three: Liquidity, Use, and Control are key components for financial efficiency.
Most people’s retirement portfolios are largely comprised 401Ks, IRAs, or another qualified plan that consists mostly of mutual funds. bonds and stocks. As people approach retirement, they approach the “red zone.”
The red zone is the time period five years before and five years after they stop working. These are the most critical years. Market downturns are devastating to retirement accounts anytime but especially during the red zone. It may be time to become risk-averse and place a high value on preserving and protecting assets. Seniors can’t wait for 10 or 20 years for markets to come back to recapture the losses.
Life insurance is one of the most stable assets around. It does not take a roller coaster ride like stocks. It is not leveraged. Whole life insurance has nearly a two-century history of paying claims and honoring guarantees, even during the Great Depression, recessions, and pandemics, like COVID-19.
As Will Rogers once remarked, “I am more concerned with the return of my money than the return on my money.”
Additionally, many investors use their cash value accounts to build new assets, such as leveraging a policy for a down payment on cash-flowing real estate or a new business.
At almost any age, life insurance is the best possible asset for passing wealth and for long-term saving (10+ years). A whole-life policy gives you great flexibility to replenish, replace, or preserve assets.
Too old for life insurance? Request an appointment to discuss your unique situation today.
Next week, I will share Part Two why People Purchase Life Insurance after Age 60.
Charlie Nunez, RICP
Retirement Income Certified Professional
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