Retirement planning encompasses two crucial phases: the accumulation phase and the distribution phase.
During the Accumulation Phase, which spans our working years, individuals set aside and invest income to prepare for retirement. This results in an account balance that accumulates until the day of retirement.
The Distribution Phase commences on retirement day and continues throughout one's life. It involves converting accumulated accounts into income, ultimately determining the retiree's lifestyle in retirement. While much attention is often given to maximizing the account balance for retirement, it's essential to consider non-financial aspects and limitations when evaluating alternatives.
The table below highlights some of these:
Here Are Some Key Considerations:
1. Taxes Are Likely to Increase:
Reviewing historical trends suggests an increased likelihood of future tax hikes, given the correlation between national debt and GDP. As the U.S. national debt has surged, reaching $33.17 trillion, a 312% increase in 15 years, many anticipate potential tax increases.
2. IUL as a Tax-Free Retirement Income Solution:
Indexed Universal Life (IUL) presents a tax-efficient retirement solution. In addition to leveraging Roth IRAs, IUL can complement and address gaps left by other retirement accounts. IUL policies offer the potential for cash accumulation, tax-free income, accelerated living benefit riders, and an income tax-free death benefit.
Under the current tax code (section 7702), permanent life insurance allows for retirement income not counted or taxed as income. The cash value serves as collateral for a tax-free loan against the death benefit, providing flexibility in withdrawals and loans during retirement.
3. Initiating the Tax-Free Retirement Income Conversation:
To guide clients, educate them on tax risk using historical data and proposed legislation. Assess their current tax diversification and its implications for their financial situation. Utilize interactive client presentation tools to showcase the advantages of cash value life insurance compared to alternative financial tools.
Making informed decisions involves comparing and analyzing results. By mastering this skill set, your confidence in navigating retirement planning options will grow.
If you seek tools to enhance your sales experience, reach out to Levon Justice, our life insurance expert at the Ohlson Group, for assistance. We're here to help! 😊