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FINANCIALLY Speaking Get Back Down The Retirement Mountain L ast week, I had a retirement planning meeting with a client who brought her friend, “Mary” along to meet me. “Mary” was concerned that she might not be doing enough to ensure a comfortable retirement and my client thought that I could be of great help to her. Although permanent life insurance does not typically come to mind when creating a retirement plan strategy, we started our meeting talking about why perhaps it should be. Often people don’t realize that life insurance can be much more than death benefit protection. The cash value in a permanent policy accumulates and can be borrowed without taxes, and the loan does not have to be repaid*. This can have tremendous value to your overall retirement plan by addressing several common retirement challenges. Longevity What’s the goal in climbing a mountain? The right answer is not to reach the top but rather to make it safely back down the mountain. Retirement planning is similar to mountain climbing in that the main focus is often on building retirement assets rather than planning how to get down the “retirement” mountain without running out of money. Creating a retirement spending strategy can help ensure that your money lasts as long as you do. Permanent life insurance can be another source of income in retirement. In addition, you will have a tax-free death benefit to leave for your loved ones. Diversification Jeffrey M. Orth is a Chartered Financial Consultant, a Certified Advisor in Senior Living, and an Investment Advisor Representative, with over 15 years experience as a business and personal planning, insurance, and wealth management specialist Jeff is available for group lectures and private consultations. Visit or call 408.842.2716. 1196521RM-May17 40 In addition to diversifying your retirement assets, it is also important to have several options for retirement income. Life insurance provides an additional option to supplement conventional sources of retirement income like 401(k), IRAs social security, etc. The difference with life insurance is the potential to quickly and easily access tax-free retirement income. The life insurance option can help avoid other alternatives, such as having to get a bank loan, or locking in losses in an investment account if the market values are currently down, or facing potential tax penalties in order to get quick access. The flexibility of a tax-free loan and/or withdrawal against your life insurance can be a great option, no matter what the future holds. Volatility In retirement, a common problem when taking income withdrawals, is earnings volatility. For example, if you withdraw 3% in a year when the market is down say 10%, then you have lost 13% of your money. But if you have a permanent life insurance policy as part of your retirement plan, you have the option to stop taking withdrawals from your brokerage account or retirement account when the market is down, giving it a chance to recover**. Having the option to access the cash value in your life insurance as supplemental retirement income can act as a cushion against volatility. Conservation Many people save a significant portion saved for their retirement in 401(k)s and IRAs. They are often reluctant to use this source for retirement income, fearing the money could run out or perhaps they decide they want to leave a sizeable amount to loved ones and charities. There is also the chance that a spouse with a long-term terminal illness could decimate a couple’s savings. Life insurance can create another option that is separate from your other retirement plan assets. Life insurance will give you the peace of mind that spent-down assets will be replaced for survivor retirement needs, or passed to loved ones in a tax-efficient way. Social Security Social Security is the only guaranteed source of retirement income for many retirees, yet money is constantly left on the table as many do not know how to maximize their benefits. Often, retirees don’t realize that the age you begin taking social security impacts the amount of lifetime benefits. Creating a retirement income strategy using the cash value in a life insurance policy to supplement income while delaying social security, can translate into thousands of dollars in additional retirement income over a 30-year retirement. Permanent life insurance provides options for retirement in an uncertain world by providing both death benefit protection and cash value to use as needed. The initial retirement planning meeting with “Mary” actually turned into few meetings, and as a result of our conversations and planning, we were able to develop a strategy that “Mary” felt substantially improved her retirement plan and gave her peace of mind that she will be able to successfully ‘get down the retirement mountain’. You might also feel better about your own retirement plan if you had a similar conversation with a capable financial advisor. *As long as premiums are paid and the policy does not lapse. Assumes contract is not a modified endowment contract under IRC 7702A. **IRA owners over age 70½ must take minimum distributions and do not have the option of not taking withdrawals. GILROY • MORGAN HILL • SAN MARTIN JULY / AUGUST 2015