The U.S. Government Accountability Office (GAO) reports:
“Fundamental changes have occurred over the past 40 years to the nation’s retirement system. These changes have made it increasingly difficult for people to plan and save effectively for a financially secure retirement. . . . About a third of private-sector workers in the United States do not have access to a retirement plan through their employers. . . .
Since 1975, there has been a marked shift to defined contribution plans, such as 401(k)s, as the primary type of retirement plan. Combined with increases in longevity, this shift has increased the risks and responsibilities for individuals in planning and managing their retirement. Yet research shows that many households are ill-equipped for this task and have little or no retirement savings.”
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ToggleAs the GAO reports, many households have little or no retirement savings and about 1/3 of workers do not have access to an employer retirement plan at all.
According to a 2019 Charles Schwab survey, 59% of Americans are living paycheck to paycheck. Still $483 is the average spent per month on non-essentials.
A 2018 study by Northwestern Mutual found:
Life insurance can supplement the lack of retirement savings. Only life insurance can create an estate worth as much as 1,000 times or more the cost of one premium. For instance, one $50 monthly premium can result in a $50,000 estate. ∗
That $50,000 life insurance policy in our example can have living benefits that pay out all or a portion of the death benefit should you become terminally, chronically, or critically ill. Cash value accumulated in a permanent life policy can be borrowed to help with financial needs. The death benefit can pass to your beneficiaries tax-free to pay for your funeral expenses.
Upon the death of a spouse, the lesser of the two social security incomes goes away. This can result in a significant loss of income for the surviving spouse.
The income loss from the social security income can be recovered with the proceeds of a life insurance policy.
There’s a family business. One adult child wants to take over the family business. The other adult child wants to sell and take his inheritance.
The latter adult child gets his inheritance via the proceeds from a life insurance policy.
Most pensions offer the highest monthly dollar payout as long as you’re living. Upon your death, the pension ceases. This can have devastating financial consequence for a spouse or other dependents.
Take the higher “life only” pension payout and have a permanent life insurance policy to make up for the loss of income upon death.
As of 2022, you will not pay federal estate taxes unless your estate exceeds $12.06 million. Federal estate taxes will not be a problem for most Americans.
However, 12 states and the District of Columbia have estate taxes on lesser amounts and 6 states have inheritance taxes. This can mean that before your heirs can take legal possession of inherited property the taxes have to be paid.
There are exemptions as to who has to pay the tax, so these matters should be discussed with a tax accountant. There is no federal inheritance tax.
Life insurance proceeds can pass to your heirs tax-free and be used to pay estate taxes.
Life insurance may not be the only solution, but it is clearly the most multi-faceted, comprehensive, competitively low-cost solution to the diverse financial problems confronted in retirement. Put $50 in an IRA, CD, savings account and die tomorrow, your beneficiaries receive $50 less taxes owed to the federal government. That same $50 paid to a life insurance premium can result in 1,000 times that amount in a tax-free payout to your beneficiary. ∗
We devoted an entire section to Indexed Universal Life and the coverage these policies afford are particularly well-suited for retirement protection.
Annuities have been around for centuries, literally since Roman times. The pension obligations of major corporations such as Lockheed-Martin, Bristol-Myers Squibb, and Dana Corporation are managed by annuities.
Listen to Sean Ruggiero explain how a Fixed Indexed Annuity can provide retirement protection for you. Sean is a Certified Equity Professional, Retirement Income Certified Professional, Wealth Management Certified Professional, and a Registered Investment Advisor. He is also author of the book 7 Benefits of FIAs for Retirement.
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