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Can you save and fund retirement using ONLY life insurance?

  • Writer: David H. Kinder, RFC®, ChFC®, CLU®
    David H. Kinder, RFC®, ChFC®, CLU®
  • May 14, 2021
  • 2 min read

Updated: Jan 20, 2023


Indulge me while I start out with this important fact:


The rate of return in cash value life insurance SUCKS!


And I don't care if you're talking about Whole Life or Indexed Universal Life or anything else.


So the question is basically this: Can I plan for a successful retirement using ONLY cash value life insurance and not doing any additional outside investing or leveraging my policy for other economic opportunities? Just the life insurance?


The answer is yes. How can we say this? It's simple. It's not the rate of return that matters.


It's the volume of savings and how the tax code treats it in retirement.


Now, let's suppose that you were doing traditional planning and you're barely saving $5,000 a year out of $100,000 of income? What if we could multiply your savings by a factor of 5 to $25,000 a year? You can have a far better situation than just saving $5,000 a year.


How do we find the money?


We do a complete inventory and assessment of your financial situation. We've identified as many as 36 kinds of "wealth transfers" that are designed to steal your wealth with your consent. From there, we figure out how to put YOU in the captain's seat of your financial planning so your wealth benefits YOU more than others.


Let me put it this way:


Traditionally: If you're a family earning $100,000 a year and you're able to save $5,000 a year... and you are choosing investments to earn an extra 2% increase... that's only an extra $100 a year improvement, but usually involves taking on more investment risks.


Redirecting wealth transfers: Let's say that we can help you save just 2% off the top of $100,000 a year... that's a $2,000 a year improvement... without risk.


Okay, that's the immediate benefit. What about the cash flow in retirement?



In short, the higher the cash flow against the life insurance, the higher the equivalent rate of return you'd need in a competing IRS Regulated Retirement Plan. I helped my parents retire last year and we're using a strategy to fund income today and cash flow in retirement after 10 years. To do the equivalent in an IRS regulated retirement plan, they'd have to either:

  • Earn over 11.5% a year, each year, indefinitely or

  • Have over $1.7 million in that plan to spend it in the same way.

That's why I tell people that "I can show you how to spend $460,000 in retirement as though it was over $1.7 million."


So yes, it can certainly be done... but to do the job right, we'd need to greatly increase the rate of savings. If you're comparing a "traditional planning" strategy and cash flow to fund life insurance and kept the amount of savings in the policy the same as another investment... it won't work. Remember: life insurance has a horrible rate of return. We can't treat it in a planning strategy like any other 'investment' or 'security'. It requires a higher level of thinking and savings to make it work.

 
 

Phone & Text:

(951) 313-8208

Regulatory Disclosure: Not Legal, Tax, or Securities Investment Advice:

The material discussed on this web site is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice, nor does it represent any specific company or specific products.  David H. Kinder, RFC®, ChFC®, CLU® is not registered nor licensed as a Registered Investment Advisory Firm (RIA), Investment Advisor Representative (IAR), nor as a Registered Representative (RR) with any broker/dealer firm, and is therefore not registered with, or supervised by, the U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), or any state securities regulatory office.  As such, David H. Kinder, RFC®, ChFC®, CLU® does not provide investment advice, specifically: buying, selling, holding, risk analysis, or any other analysis of securities, nor the asset allocation of securities portfolios. For specific investment advice on your securities investment portfolio, please contact a licensed and registered investment professional in your state.

David H. Kinder, RFC®, ChFC®, CLU® does offer general investment information for educational purposes and may propose alternative financial strategies that do not contain or include securities. He does also discuss the pros and cons of various kinds of accounts (such as IRS regulated retirement plans) and is considered incidental advice surrounding various strategies and solutions, but does not necessarily constitute advice on the underlying securities.  

 

For tax or legal services and advice, please consult a licensed professional in your state.  Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary and the information should be relied upon only when coordinated with individual professional advice.

David H. Kinder, RFC®, ChFC®, CLU® is a life, accident & health insurance agent in California (CA Insurance License #0E54187) and can easily be licensed to do business in other states. David Kinder Insurance and Financial Wealth Solutions is the marketing name for David H. Kinder, RFC®, ChFC®, CLU® and is not affiliated with any other company. David Kinder Financial Consulting and Analysis Services offers separate financial analysis services that may be appropriate, offered by engagement agreement, and on a fee-for-service basis that does not offset commissions earned through product placement.  Any recommendations through these services can be implemented with any licensed professional the client chooses, including David Kinder Insurance and Financial Wealth Solutions.

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