Planning for Retirement
Most people want to retire at some point in the future. When they choose to retire and how much money they need at retirement differs from person to person. It is important to start planning early to insure you have the income you need to live the lifestyle you want when you are ready to retire.
There are many ways to fund retirement, including:
- Taxable Investments
- Tax-Deferred Accumulation Vehicles
- Qualified Plans
- and Life Insurance
Taxable Investments
Certain taxable investments such as brokerage accounts, private equity, rental property, royalties, or CD’s can provide liquidity for retirement income and other financial needs. These investments help to diversify your portfolio, yet income and capital gains taxes can reduce returns.
Tax-Deferred Accumulation Vehicles
Annuities also help you diversify your portfolio, while providing you with tax-deferred growth. Any withdrawals taken prior to age 59 ½ are generally subject to ordinary income taxes, plus a 10% federal tax penalty. All capital gains are converted to ordinary income at distribution.
Qualified Plans
Qualified Pension Plans and IRAs are probably the most popular accumulation vehicles available today. They offer tax-deductible contributions and tax-deferred growth. However, there are drawbacks to qualified plans:
- Income at retirement is fully taxable.
- Early withdrawals may be subject to penalty.
- Regulations limit how much you can contribute on an annual basis.
- Distributions are required at a specified age.
Life Insurance
Life insurance is commonly used to provide financial protection in the event of premature death. You can protect your spouse, children, your business, or other beneficiaries.
Cash value life insurance can provide more than protection. It is a valuable planning tool as it accumulates tax-deferred providing income options to supplement retirement, or other needs and objectives such as legacy planning.
Indexed Universal Life
An Indexed Universal Life Insurance (IUL) is a cash value life insurance policy. It provides the opportunity to increase the Accumulation Value within a policy without exposing your Accumulation to downside risk.
Technically Speaking...
An IUL policy offers multiple one-year Indexed Point-to-point strategies to determine the interest to be credited to your policy as well as a Fixed Account Option. Indexed strategies use the performance of a market, between specific time frames, to determine the interest rate applied to the policy. The interest rate applied may be subject to limitations, such as a cap or specified rate. A fixed account will earn interest at a rate periodically determined by the company. Interest is calculated using a compound method assuming a 365-day year and is credited at an annual effective interest rate. Any surrenders will reduce the amount of interest credit to your policy.
Hypothetically Speaking...
An Indexed Universal Life policy provides peace of mind during volatile markets. You choose between several methods of having interest credited to your policy. Because indexed strategies are based upon the movement of an index, there may be concern about what happens in a year when the index decreases. Not to worry, within the IUL no indexed strategy will be credited at a negative interest rate. This allows you to take advantage of the potential increases in the index while maintaining a level of protection in the event the index drops below 0% (1).
Indexed Universal Life Insurance policy is not a registered security or stock market investment and does not directly participate in any stock or equity investment or index. When an individual purchases the policy, the individual is not buying an ownership interest in any stock or index.
We do not make any recommendations regarding the selection of indexed strategies. We do not guarantee the performance of any indexed strategies.
1 You will never be credited a negative interest rate related to a change in the index. However, due to monthly deductions to your policy, your accumulation value has the potential to decrease regardless of the interest rate credited.