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Advanced Markets

Retirement Insiders specializes in retirement income. Absolute musts in that equation are what we call “Advanced Market” solutions. These include properly structured life insurance policies (IULs) and annuities. These solutions help to minimize your retirement risks: longevity risk, tax risk, market (volatility) risk, and health care risk; the goal is to design a plan that allows you to live the lifestyle you want in retirement.

We do not provide conventional advice about traditional retirement vehicles. You won’t likely feel reassured if you’re like millions of Americans who have followed the crowd, adhering to widely accepted strategies, like 401(k)’s and IRA’s, when it comes to accumulating wealth and preparing for retirement. While the principles we promote have been helping the affluent achieve greater financial stability for decades—even during some of the nation’s worst economic storms—they are not well-known.

Tax-Free Options

As individuals plan for their retirement, one of the biggest concerns is ensuring that they will have sufficient funds to meet their needs during their golden years. One popular strategy for achieving this goal is to invest in tax-free retirement accounts (TFRAs).  A TFRA is a type of investment account that allows an individual to save for retirement without paying taxes on the earnings or withdrawals.

Traditional TFRAs

The two most common types of tax-free retirement accounts are Roth IRA and Roth 401(k). Both accounts allow individuals to contribute after-tax dollars to their retirement account and earn tax-free growth. When it comes time to withdraw funds in retirement, individuals do not have to pay taxes on any earnings or withdrawals.

One of the biggest advantages of a tax-free retirement account is that it provides individuals with the flexibility to withdraw funds without worrying about taxes. This can be particularly beneficial for individuals who expect to be in a higher tax bracket during retirement.

There are disadvantages to these vehicles to be aware of: each has contribution limits and both are subject to market volatility. Each is also subject to penalities if monies are withdraw prior to age 59 1/2.

The Unknown TFRA:  Indexed Universal Life Insurance (IULs)

Indexed universal life insurance is a type of permanent life insurance that provides both a death benefit and a cash value component that can be used as a tax-free vehicle in retirement.

 

Why Are IULs Good For Retirement?

Indexed Universal Life Insurance (IUL) policies are a type of permanent life insurance that can be a useful tool for retirement planning, but whether they are the best option for you will depend on your individual circumstances and financial goals.

Here are a few reasons why IULs can be good for retirement:

  1. Tax-Advantaged Growth and Distributions: One of the main advantages of IULs is that they offer tax-free growth, which means that the cash value of the policy grows without being subject to income taxes. This can be particularly advantageous for retirement planning, as it allows your money to grow more quickly over time.  In addition, you can take tax-free distributions from your policy that helps mitigate typical tax risks facing retirees.
  2. Protection Against Market Volatility: IULs offer the potential for market-linked returns, without the downside risk associated with traditional investments. The policy’s cash value is linked to the performance of an index, such as the S&P 500, but is also protected from market downturns by a minimum guaranteed interest rate. This can be an attractive feature for retirees who want to protect their retirement savings from market volatility.
  3. Flexibility: IULs offer a high degree of flexibility in terms of premiums, death benefit, and cash value accumulation. You can adjust your premium payments to suit your budget, and you can choose to increase or decrease your death benefit as your needs change over time. Additionally, IULs allow you to access the cash value of the policy through loans or withdrawals, which can be useful for supplementing retirement income.
  4. Estate Planning Benefits: IULs can also be an effective estate planning tool, as the death benefit is paid out tax-free to your beneficiaries. This can help ensure that your loved ones are financially protected in the event of your death.

IULs provide a vehicle to enjoy both a tax-free income in retirement and a tax-free death benefit to your heirs.  It’s always a good idea to look at each situation from a global basis to see if it makes sense to explore this as a retirement tool.

Annuities

Plain and simple, annuities are contracts with insurance companies.  The insurance company takes on the risk of protecting your principal from any market losses, while also providing the opportunity to participate in market gains.  Don’t be fooled, though, the returns on annuities are NOT congruent with the market… they do, however, provide reasonable returns and can be a great solution for asset.  They can be very straightforward, or they can have some complexity to them, it really depends on your specific situation.  One thing to know is that they are very customizable to meet the dynamic needs of retirement. 

Annuities solve for very specific concerns that include principal protection, income for life, long term care, and legacy.

Principal Protection

As the phrase suggests, your principal is insulated from ever reducing due to market conditions. 

Income for Life

We are all familiar with social security… we get consistent monthly income for as long as we are living.  These payments are based on what you contribute over your life via social security taxes.  It provides income for life, and annuities are the only vehicle that can provide the same benefit.

Long Term Care

Annuities can be a great vehicle to supplement your current health care coverage in the event of an unforeseen large medical condition.  There are many different options, but some include “income doublers” where your normal payment is “doubled” when certain conditions are met and for a specified amount of time.  Again, a supplement, not the answer to health care in retirement but certainly a “fall back” position so you don’t have to immediately dip into your retirement savings.

Legacy

Planning for the lives of others that come after you.  It has been said that we will forever be known for the tracks we leave.  You have the opportunity to leave positive tracks with a lasting legacy for your family or a charitable cause with a monetary contribution. 

An annuity with a guaranteed death benefit is designed to protect your loved ones, including your spouse, children and grandkids.  It puts you in control as to when, to whom and how your legacy is disbursed.  In other words, depending upon the elections you make when purchasing an annuity, your money can be transferred in a timely fashion to the next generation in a lump sum or payments… and it’s often done without the headache of probate.

Leaving something behind for the people you hold dear may fit into your overall retirement plan.  Annuities may take you down the path for the legacy you wish for.