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A Great Idea That's Only Getting Better. Stronger. Easier. Life Insurance Retirement Plan.

For life insurance industry veterans, using cash value life insurance to supplement retirement savings is as old as the rate book. Overfunding premiums and enjoying the advantages of both insurance protection and tax-free accumulation (without the burden of qualified plan rules) is what makes our product so unique. And with the potential for tax-free income down the road, we really have an unmatched solution for clients wanting to enhance their retirement in a very tax-efficient way.

If life insurance is new to you, or if you just need a refresher on the Life Insurance Retirement Plan (LIRP) concept, then click here to review a primer on how cash value life insurance has always featured many of the characteristics of a Roth IRA. For the right high net worth client, a LIRP provides a compelling solution for those wanting to supplement their retirement and/or reposition taxable assets into tax-advantaged investments designed to provide both insurance and income.

The LIRP opportunity is now better than ever….but why?

Tax Cuts and Jobs Act (TCJA)

Because of the TCJA of 2017, many of your clients are enjoying the impact of lower taxes and increased disposable income. For those looking to park this "found money," a LIRP can provide an ideal planning strategy. This approach is even more powerful for clients who are concerned that tax rates will eventually return to pre-TCJA levels or higher, making a LIRP an even more attractive hedge against future taxes. Regardless, it's a rare client who enjoys paying tax whether the rate is low, high, fair or otherwise. And reducing the tax burden after retirement is a goal that all of your clients can relate to.

Related: Lincoln Advanced Sales Overview - The New Tax Act

Related: Navigating the New Tax Act - Windsor

Products, products, products

There was a time when the funding of LIRP was the sole domain of Whole Life. Then upstarts like Universal Life and Variable Life products thrived, but over decades of market volatility and interest rate fluctuations also lost momentum. The ideal LIRP product requires a combination of flexibility, along with the ability to participate in market gains and to mitigate market downturns. Since its introduction, Indexed Universal Life (IUL) has proven to be the industry's cash value workhorse. With a compelling consumer story, IUL sales have consistently stimulated industry-wide competition resulting in rapid product innovation. Today, every major carrier has developed products that are more efficient, effective and customizable than ever before, offering a host of features, riders, indexing strategies and benefits to enhance the client's retirement income goals -- while offering protection if they die or get sick along the way.

Changing risk tolerance…protecting that income stream!

So your clients who have been funding their IUL for 20 years have retired and stopped paying premiums. As they ease into a long and, hopefully, healthy retirement, that significant pot of money that's been growing tax-free looks very attractive. While the anticipation of tax-free income is exactly what they've planned for, the potential inconsistency of that income stream may create some heartburn as they proceed through their golden years. And if they live beyond life expectancy, depending on a regular and predictable source of income will likely become more important. Of course, returns on IUL are not guaranteed, but there are now riders available to secure a totally predictable retirement income stream when the client decides to pull that lever. In essence, the client can elect to "convert" the accumulated cash value to a de facto single premium immediate annuity (SPIA). The client would then receive a guaranteed income stream with all concerns of the policy lapsing (and the resulting tax issue) completely eliminated. Within the life of a product, the client's tolerance for risk is accounted for and adjusted accordingly - powerful stuff!

Related: Lifetime Income Benefit Rider - Quick Reference Guide

The "New Kind" of Underwriting 

Although clients who decide to implement a LIRP need to have a legitimate life insurance need, they may not be expecting a traditional/conventional underwriting process to get approved and move forward. With emphasis on accumulation, distribution, and tax planning, the client may simply not have the same mindset as if they were pursuing life insurance for pure protection needs. What may be perceived as a lengthy and intrusive means to an end just might result in the client losing their motivation. And if you as an advisor don't specialize in life insurance, the process might be as tiring for you as it is for your client. But life (insurance) is getting easier! Many carriers have rolled out "accelerated" or "non-medical" underwriting programs that make the underwriting process a more comfortable and much faster experience for the client. The qualified client would not need to submit lab specimens, and risk would primarily be assessed by review of data points and a telephone interview. These programs are limited by variables such as face amount and age, but we're seeing these qualifications expand as carriers become increasing satisfied with the quality of business put on the books. Welcome to the "new kind" of underwriting! 

Click here for a guide to "No Exam Underwriting Programs" courtesy of Windsor

Putting it all together, today's financial environment is perfect for the products you know and sell.  At Windsor, we know the products, the features, the companies and the underwriting that will fit your clients' needs and provide solutions and security for their future. The time is now.

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Friday, 14 May 2021
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