Alternative Funding for Retirement Income

As a seasoned financial veteran who spent his carrier focused on retirement income planning and spending, Joe has gained a tremendous appreciation for the benefits offered through specialty design life insurance. The tax advantages and investment choices are compelling. One cash value product line is indexed universal life that uses domestic or foreign indices with downside protection. When properly designed, these contracts offer such benefits as tax deferred accumulation, competitive growth with low risk due to indexing, and tax free income at retirement. ¹ But to achieve the benefit of tax efficient income one must fund their policy over a period of time. This leads to an important consideration for those who want to fund their policy with existing funds. 

Does one leave their funds in their current savings or allocation or shift funds to a vehicle better designed to fund a policy? For many the choice of a 4-year or 5-year term structured cash flow has been an ideal duration for funding policies like indexed universal life. A structured cash flow offers a customizable income stream providing a monthly payment of principal and interest over a specific period of time.   The payment is similar to a mortgage in reverse but shorter in duration and with competitive interest rates of 5% to 7%.   These higher fixed rates often result in a substantial increase in benefits within the policy resulting in an increase in the initial death benefit and future retirement income.   Even when compared to the insurance companies own funding option, a Premium Deposit Account, a 5-year structured cash flow at 7% versus a PDA account at 2.5% can result in a 15% increase in benefits over funding with the PDA account to the owner.  

This is a significant return over conventional premium payments and can also be used for income scenarios in retirement. Joe Hipp was a co-contributor to this press release.

^{1 A compliant TAMRA cash value life insurance policy must be kept in force for the life of the policy insured to withdraw basis and loan policy gains tax-free.}