As we greeted 2018, Congress passed the most sweeping overhaul of the tax system in over 30 years. Coupled with last year’s double-digit market gains and low volatility, many Wall Street analysts forecasted that the current bull market will become the longest in history in August of this year.
Then came February and the mild winter turned volatile. America experienced the worst single-day stock market decline since 1987. What had been 2017-18’s booming bull market turned into a bear market in a matter of hours.
Over 10,000 baby boomers reaching retirement age every day, needing assistance in protecting their financial futures. So how should this news affect your thinking regarding protecting your accumulated gains earmarked for retirement?
Three Options to Protect Your Assets
1. Indexed Universal Life Policy – Liquidity, Rate of Return Income tax-free advantages
At our Life Security, we have a couple of thoughts. First, a principal-protected insurance product provides benefits, guarantees and flexibility that would amaze earlier generations of Americans. An Indexed Universal Life (IUL) policy provides liquidity, safety, rate of return and income tax-free advantages. Upon death, it also blossoms as it transfers to heirs income tax free. It avoids the risks of the market and makes you immune from three dangers: taxes going up, inflation eroding your purchasing power, and market volatility.
The advantage of max-funded insurance policies is the opportunity to “index” your policy. Indexing allows the money in your policy to gain interest when the stock market goes up, and to be completely protected from losses due to market volatility when the market goes down. How is this possible? Because your money isn’t directly in the stock market, it’s simply linked to the market and completely safeguarded from losses due to market volatility.
What’s more, every year your index “resets” on your policy anniversary. Essentially, with your annual point-to-point crediting method, where the S&P 500 is on your anniversary date becomes the new set-point for the coming year.
In summary, the safety and rate of return advantages of a properly structured and max-funded IUL are:
- You’re linked to an index.
- Your money is not in the market, so “zero’s the hero” (with your zero percent floor) and “up’s what’s up” (with the opportunity to earn up to your cap).
- You benefit from annual resets with locked-in gains.
2. The FIA Value Proposition – Conservative Retirement Savings
Clients who have learned from history, or are at least wary of it, usually fit a more conservative risk profile when it comes to their retirement savings. For over 20 years the fixed indexed annuity has offered this basic value proposition: Upside interest crediting potential linked to gains in a market index with no direct exposure to downside market risk.
The value of this proposition is greatly magnified for those boomers nearing retirement who don’t have the luxury of a 10, 15 or 20+ year time horizon to recover market losses. For them, the ability to lock in and protect previously credited interest credits in exchange for a portion of the total market upside is an important and attractive benefit.
New strategies for guaranteed income benefits have been developed to help consumers create more predictable retirement income streams. These income riders are offered with most of today’s FIA products and guarantee a lifetime income stream you can trigger at some point in the future.
Income riders can be useful planning tools in helping clients guarantee their desired monthly income goal.
Certain carriers/products seem to have performance “sweet-spots” depending on the client’s age, deferral period before income is taken, and joint or single income. With the potential for chronic care needs and rising costs of medical care, there is another option to protect financial stability and afford assistance in the event of a chronic care issue.
Annuities with chronic care riders that provide an enhanced benefit if you are unable to do two of the six ADLs (Activities of Daily Living) continue to gain popularity. Many times, these riders feature a multiplier that doubles or triples the premium available in the event of a chronic care event. This means a $100,000 initial premium could amount to $200,000 to $300,000 available for qualifying health issues. If you do not utilize the chronic care features, the annuity contract and premium still can provide income or estate planning benefits.
Principal-protected insurance products continue to evolve and provide benefits, guarantees and flexibility that would amaze earlier generations of Americans.
3. Plan Your Choice(s) – Take Your Action!
Let us Your Life Security help you make the smartest financial decisions today that best prepare you and your family from life-changing events and plan for your retirement tomorrow.
Copyright © 2017 Your Life Security, LLC, All rights reserved.