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Playing the Long Game with Death & Taxes

Integrating Life Insurance into Retirement

There is an old saying that the only things guaranteed in life are death and taxes.  The reality is some people do in fact evade taxes.  In fact, more people will be trying to evade taxes due to the current market environment and expected tax increases to pay for all the relief.  I am not saying they are doing anything illegal, but they will be utilizing smart financial planning to minimize their taxes and maximize their family’s legacy.  Otherwise stated, they will try to maximize the good assets and minimize the bad assets to die with.  

With the recent loss of the Stretch IRA, qualified money is now exposed to income taxes within 10 years of death.  Today’s $11.58 Mill federal estate tax exemption will lower to $5 Mill by 2026.  Many believe it may be lower than that, especially if the democrats win the election in November.  For high-net-worth individuals, they may look to gift more away during their lifetime to reduce tax exposure when they die. 

There is a new study out which analyzes the value of life insurance in the financial planning perspective.  It takes a long view of life insurance along with retirement.  There is substantive evidence that an integrated approach with investments, whole life insurance and income annuities can provide more efficient retirement outcomes than relying on investments alone.  Launch the below article by Wade Pfau to learn more. 

Integrating Whole Life Insurance into Retirement Income Planning – Wade D. Pfau (3/2020)

I have always struggled with how financial planning takes a long view on retirement but a short view on life insurance.  The Life Insurance Conversation™ is different than any other insurance conversation because the claim is not an “if” but a “when”.  When you add the value of a long-term care rider to today’s life insurance coverage, you make it an even more versatile planning tool.  The thought that clients may not need life insurance when they retire, or when the home is paid off, or when the kids are grown, may be true.  Just because someone may not “need” life insurance, does not mean it wouldn’t add value to their situation.  Today, more people are looking for that safety-net underneath them. 

Click here for an article discussing the different roles life insurance can play in retirement. 

Three Concerns. One Solution.

There are 3 main financial fears many have today: dying early, living too long and running out of assets, or getting sick along the way.  By adding a long-term care rider to a permanent life insurance policy it creates a more valuable tool.  If they die early, there is a tax- free death benefit.  If they get sick along the way and need chronic care, they can draw from the death benefit. If they live long, they can look to draw off the death benefit (with a unique rider) or the cash value as a longevity income play.  Launch the below link to learn more.

Three Concerns. One Solution.

Whether you are thinking protection or probabilities, permanent life insurance with a long-term care rider adds value and flexibility to most client situations.  Yes, you might out invest it; but you might not.  Life insurance has the advantage of being received income-tax free and if owned properly, estate-tax free.  Are you measuring what they make or what they keep? 

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The information contained on this website is provided "as is" and does not constitute legal, accounting or tax advice. We are not acting as your attorney, accountant or tax professional. We encourage you to contact the appropriate professional for legal and tax information pertaining to your specific needs and circumstances.
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