IF YOU WILL READ NO FURTHER

I read several financial newsletters each week and the Wall Street Journal almost every day and I subscribe to Stratfor, one of the best world intelligence services for executives. I can tell you for certain the world economy is shaky but will be just fine; or we are going to experience a financial crisis of biblical proportions. I am less sure about Climate Change or whether the Juan will be the new reserve currency.

But what I am really sure of is that I would not want to be retired living off of my assets and depending on my financial advisor to assure me that I will have all the money I need for as long as I need it. I would want him or her to be in close contact with the folks at Westland Financial who can help him/her set me up with appropriate annuities and long-term care strategies to protect my income and my quality of life for as long as I am on this earth worrying about climate change, the rising dollar and the California drought.

INTERESTING FACT

The IRS reported recently that the predicted 3-6million people who would pay the fine instead of purchasing Obamacare turned out to be 7.5 million.  Another 12 million claimed an exemption from the fine due to low income levels or other hardships.  So the 30 million who couldn’t afford it, now have it free and the 30 million that did have it, now can’t afford it.

THOUGHT FOR THE WEEK

Early in my life insurance career I was taught “Life Insurance, the 9% Investment”. It was all about how the tax deferred cash value built up and the tax free access through loans or the tax free distribution at death equated to any other investments with a before tax rate of return of 9%. It was a stretch, but in many instances it was no doubt true. Problem was, not everyone believed it.

For years ever since, I have sold insurance for a number of reasons; paid death claims, paid long-term care claims, helped borrow money for clients at critical times and witnessed the peace-of-mind experienced by people who were diagnosed with a life shortening disease who had a large life insurance estate and could visualize exactly how that would benefit those they love.

Lately though I have been showing people on a regular basis what a great investment life insurance actually is. And I must say it is fun to see when the light goes on and they actually get it. Because everyone needs to leave a legacy; to plan not to do so means that you have to KNOW when death will occur or else be at high risk of running out of money. In retirement, life expectancy creates more uncertainty in their financial planning in addition to the economy, the FED, politics, and maybe even climate change. Asking an 80 year old client to bare all of that when there are alternatives that eliminate the uncertainty, well I think it is irresponsible. But I digress

What about that cost/ benefit thing I was talking about?

Life insurance in force when one is 70+ years old is not an “if you die” situation, but a “when you die” proposition. Money being paid into a policy either one time or annually, will create a tax free legacy with about a 7% or 8% rate of return at life expectancy….much greater if they are unfortunate to die earlier. “The bad news, mom died at 82. The good news is that her life insurance investment earned 13% tax free.”

Fixed and Index deferred annuities and SPIAs are even more valuable to retirees, because they provide dependable, risk free retirement income at such a high equivalent rate of return. Imagine replacing the monthly income you are now delivering to your client from their entire portfolio using only 50-60% of it. How would you invest the rest of the portfolio for better growth? And don’t forget the tax efficiency that is available depending on the needs of the client. Now the newer products using Dynamic Indexing provide increased options for retirement income planning at reduced costs to the client. No wonder the Fixed Indexed Annuities are replacing variable annuities at an increasing rate.

I have lived in the financial planning world for the last 40+ years and presented my products and solutions in the context of the total financial plan. I have never been able (or wanted) to convince someone they should buy insurance or adopt my strategies out of fear or other emotion that clogs the facts. It has always been for me, a cost vs. benefit issue. And ask anyone who has clients collecting their life insurance to pay for long-term care if they think selling their clients MoneyGuard or conventional LTCi was a good idea. Better yet, ask yourself when your client instructs you to start liquidating their portfolio to pay for care if it wouldn’t have been wiser to have an insurance policy in place that would be kicking in $50k to $70k per year (tax free) to help them stay in their home and preserve their dignity.

Whether it is a discussion of a life insurance policy to guarantee a legacy or pay for long-term care, or an annuity that will pay lifetime income, refraining from properly presenting these concepts to your retired client is a dangerous practice. Having insurance plans in place and never needing to use them is no big deal. Needing what isn’t there? Now

that’s a big deal.

AND FINALLY?

Are you having trouble networking and picking up new clients? The Wall Street Journal spoke to some veterans in the industry about how to reach more perspective clients. One story focused on a veteran who would travel to a new neighborhood and let his cat roam the streets. When a stranger picked the cat up he would find a collar saying, “Call this number if you find me.” From the Journal: “Inevitably, a good Samaritan with deep pockets would comfort the stray and contact the owner at work. The stockbroker feigned relief, gushed gratitude, and began the steady push for a new account.”  No matter how you prospect, the key to a bright and successful future involves creativity and constant prospecting.

Thought for the day:

“I asked Darrell Royal, the coach of the Texas Longhorns, why he didn’t recruit me. He said, “Well, Walt, we took a look at you, and you weren’t any good.” Walt Garrison/Oklahoma State

If you will read no further:

Westland Financial has just completed testing a new service that will make placing simple term and universal life a no-brainer for financial planners. Imagine going on-line typing in your client’s name and date of birth and the amount of term insurance, how long a term period; then push the button to get every important term carrier’s rate.

Pick the one you want and push the button again. Answer just a couple more questions and push the button for the last time and we take care of the rest….formal application taken over the phone with the client, exam scheduled (if needed) required underwriting information gathered from their physicians and issue the policy. Then we’ll send the policy to the client (or to you, if you prefer) collect the premium and send you the commission. Trust me, you will be ashamed to earn that money with so little effort. But your client will get the best deal available.

If you want, you can put a link on your website and let visitors and clients do it all themselves. Then we will notify you that a request has been received and take care of everything for you…. and send you the commission. Just call (800)238-8144 or email Tim Morton and he will get you all set up….no charge. BECAUSE THAT’S THE WAY WE ROLL!

Thought for the week:

Thought for the day: When you are dead, you don’t know you are dead. It is difficult only for others. It is the same when you are stupid. Unknown

If you will read no further: Last week I presented LTCi and Linked Benefit life to a full house luncheon seminar. In a little back-and-forth with the audience, we discussed a comparison to purchasing a lottery ticket. But every one of my tickets will win an average of 150% of the cost of the ticket and some will win up to 450% or more. TAX FREE! They agreed that comparing Linked-benefit to winning lottery tickets is pretty close and should make it sell like hotcakes. (Do hotcakes really sell that well??) The point being, that when clients understand the value in committing some of the money in their portfolio to products like TLC, or MoneyGuard or Asset Care instead of Banks, Bonds and Money Market accounts…or in many cases, even stocks, they readily embrace the idea. There was no consensus on whether or not we would still have to buy them lunch to get them to come and hear about it.

Thought for the week: Top 10 reasons your clients would like to have a linked-benefit strategy in their portfolio…if you would just suggest it.

1. They want to keep their money in their estate so they can pass it on to their children

2. Their ability to stay at home when they need care, surrounded by familiar surroundings and loved ones is greatly increased.

3. If a nursing home is the best solution, “cost” will not be the determining factor in choosing the appropriate one. Keeps peace in the family.

4. They like the fact that companies offer geriatric care management rather than paying fees to attorneys and other specialists

5. By recommending these products for their portfolio you have additionally become a source of expert advice for recommending care providers and other local assistance via the carrier.

6. They won’t have to depend on their children to make the right choices as they will have professional assistance.

7. They will never put their children in a position of having to choose between the high cost of long term care for one parent and protecting the assets of the healthy parent.

8. They will know that no harm or ruin will come to a spouse or family member’s health or lifestyle by making them a primary caregiver.

9. Frees up time for family members to serve as advocates for their parent’s medical and care giving needs, versus being the caregiver. Changes dramatically the quality of time a chronically ill person spends with family members.

10. Kids are more likely to use care that is pre-funded allows the children to get the best possible care for mom or dad without risking it dwindling their inheritance.

There is a lot of risk inherent in the long-term care issue. For you as an advisor, the most imbarasing risk it that long-term care will require you to draw down on a client’s portfolio at a time when the market is not performing as planned. That could happen you know. Putting linked-benefit life into the portfolio not only takes that risk off the table, but the fixed/guaranteed nature of the cash value also helps reduce the volatility risk that clients fear more as they continue to age. Call us and let us help you become a hero to your clients.

Another Thought: PS. Here is an important interest rate announcement from North American Life…effective April 1st.

Thought for the day:

“I’m working as hard as I can to get my life and my cash to run out at the same time. If I can just die after lunch Tuesday, everything will be perfect.”       – Doug Sanders, professional golfer

If you read no further:

I have been thinking about what it will be like when your clients die without using their long-term care policies.  Will their heirs bemoan the fact that you wasted $50K or 75K of their inheritance?  Probably not.  But what about if they needed care and didn’t have an insurance plan in place; and now it is cost the estate $75k -$100k a year?  Might they regret the decision to ignore it when given the chance?

If there is a Linked-Benefit product in their portfolio whichever way it goes is protected.

Thought for the week:

A Letter to Scott

Hello Scott:

You asked me, “Since at age 52 I am on track to create a liquid estate of $2-3million, why would I need an annuity, permanent life, LTC insurance….etc.?”  My short answer is…you don’t need it! But in light of future uncertainty, you may want one or more of these in your portfolio.

Nobody “needs” to have any particular financial instrument; bank account, stocks, mutual funds, REITs, ETFs and so on.  If your estate is worth over $1million from term insurance and other assets, you probably have enough to replace enough of your future living value should you die in the near future.  With you gone and $1million from insurance in your wife’s pocket she might get by with only a part time job.  And she won’t have to be concerned about paying for your care someday.

Once retired, that insurance will have expired but you will probably have plenty of money.  Other than making sure you don’t outlive your income, the only major concern you face is the cost of long-term care, with odds at 60% of needing it at some point; and possibly for several years.  If you plan on paying the bills yourself from your wealth you surely will have the money.  I imagine some of it will be invested in a portfolio of stocks and bonds, perhaps some real estate and some in a risk-free and liquid account.

Frankly, that sounds typical of many of my clients.  At age 70 I can tell you, things look a lot different from here.  Each year as I watch friends and acquaintances age, get sick and die, I become more aware of the possibilities I face and I understand from experience that personal care as we get older is the number one need if we are lucky to live into our 80s and beyond.  That said, personal care is very expensive and I don’t EVER want to be in a nursing home….which makes it even more expensive…..unless you want to turn your wife into a nursemaid. Shortly her health will be ruined as well.

You can pay for it.  I have observed that the dynamic changes when they start writing those checks for $6-10 thousand per month.  There is not one of them who wouldn’t like to have a fat check coming every month from an insurance company to help cover those bills.  Today it would cost you about $7,000 per month for care and in 20 years perhaps as much as $15,000 per month.  That could be over half a million dollars if you languish for 3 years (30 months is the average).  Your $3,000,000 may or may not cover the bills without some additional help.  If you are certain you will never need care then we can be certain that you don’t need to buy insurance…but frankly no one will notice either way.  If you do need care and you didn’t buy insurance it could be financially devastating…especially when you leave a wife that is 15 years younger than you.  We won’t know until you get there….and I certainly won’t be around to tell you, “I told you so”.

OK, so the money has to be somewhere.  If you put $100,000 in one of my insurance policies it will immediately be worth over $550,000 for long-term care at $7,200 per month.  In 20 years it will be worth $1million at $12,000 per month.

1. 1.If you never need care, your wife or kids will say, “what are we going to do with this $170,000 dad left us in the insurance policy?”
2. 2.If you do end up needing it, you wife and kids will say, “it sure is a good thing dad bought that insurance policy.  We only have to come up with $1200 per month.”
3. 3.If you need care and don’t have the insurance the wife and kids will say, “I sure hope he doesn’t last very long cause these bills are killing us.”…or something like that.

So do you need it?  Probably not.  But not having it will be no big deal unless you need care someday.  Then it will be a very big deal.

So I guess the real question is, “Do you want it?”

Thought for the day:
A man always has two reasons for what he does….a good one, and the real one.   -John Pierpont Morgan

If you will read no further:
2015 is shaping up to be a wild ride in the field of financial planning. Between the world situation in general and the global issues affecting our finances, helping our clients enjoy a stress-free retirement is becoming more and more problematic.

· Are you really going to tell your clients to draw 4% per year from their portfolio and not worry?
· Do you really believe that a major correction is not in our near term future?
· Are you and your clients really comfortable that a 90% probability of success is good enough?
– Will your clients feel that way during the next market downturn?
· Are you going to tell your clients not to worry about possible long-term care costs because they can “just pay the bill out of their assets”?
· Are you going to suggest that rather than leverage their savings by 3 to 5 times to pay for potential long-term care they should continue to risk having to pay several hundred thousand dollars at one hundred cents on the dollar?
· Are you actually going to guarantee they will be able to pass a significant legacy to their children?

Insurance and annuity companies are in the business of taking these risks off the table. And Westland is in the business of helping you understand, present and implement these insurance strategies in the most professional way.
“I eat my own cooking” Department
I am 70 years old and can retire any time. My wife and I are able to receive 6 ½% annuity income on enough of our assets to guarantee our retirement for as long as either of us live. We each have a paid-up long-term care policy that will cover anything we can possibly experience for however long; all paid with tax-deductible dollars. My life insurance is also paid-up because I have used the cash value (with an average net tax free crediting rate of over 5%) as my emergency savings account for all these years. The only thing I need a financial advisor for now is for a portfolio that isn’t required to do anything but provide “play checks”. I wonder how many financial planners would have set this kind of portfolio up for me. I wonder why you would not do this for your clients.

 
Recommendation for the week:
One of my favorite speakers on annuities is Tom Hegna. He thinks just like I do. Check out this short article.

Thought for the week:
Just click and check this out. If you don’t know what you should do next, call me or Nancy Woo or Randy Masciarelli. We are all available at 800-238-8144.

Thought for the day:

Life is short, break the rules, forgive quickly, kiss slowly, love truly, laugh uncontrollably, and never regret anything that made you smile. Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. – Mark Twain

If you will read not further:

Like everyone we are in the process of closing out another year. And, looking back, it is gratifying to see that we have experienced good growth again; and we are excited about the year ahead.

In a few days, two of our associates who have been at Westland ALMOST FROM THE BEGINNING will be retiring.

Susan DeNoewer, Vice President, my partner and our top wholesaler for over two dozen years will finally settle down to a life of travel for fun, and a slower pace in the desert at her home in La Quinta CA.

Susan has been with Westland Financial for 38 years with a short hiatus when she worked for a New York based broker/dealer as their Western Regional Vice President. After several years without her, I was finally able to entice her back to Westland where she has played a vital role in our success ever since. We know that, like us, many of you have come to know and love Sue over the years; and we wish her a long, healthy and enjoyable retirement.

Chris Ridd has been an integral part of our firm for over thirty years…also with a short hiatus working for one of our favorite planners. But she too could not stay away from the mother ship for too long and rejoined us to help develop and ultimately take responsibility for our Long-Term Care division. Chris will be missed by hundreds of our planner associates who have come to rely on her pleasant “can-do” personality and enthusiastic desire to serve. We don’t expect that Chris will slow down much as she will continue to work part time for me on my new projects and spend more time with her grandchildren and many other interests.

Please join us in wishing them a successful transition into a new life of daily enjoyment. And by the way, they will continue to keep their email accounts, susand@westlandinc.com and chrisr@westlandinc.com. So if you want to wish them well, please feel free to do so.

Our Ending Thought:

MERRY CHRISTMAS & HAPPY NEW YEAR!

All of us at Westland thank you for your attention and your business this year; and we promise to continue our efforts to be your finest and most dependable resource for insurance-based strategies to help you serve the best interest of your clients.

Thought for the Day:

“People often say that motivation doesn’t last. Well, neither does bathing — that’s why we recommend it daily.”                                                                                                          Zig Ziglar

If you will read no further:

There was an interesting article in a recent issue of Financial Advisor Magazine submitted by a financial planner in the Midwest.  It was about the need to be sure that clients who depend on their portfolio for their income not outlive it.  He discussed how he handled the situation using Monte Carlo with 93% likelihood of NOT running out of money.  Without getting into details (you can read for yourself by going here) my sense was that the strategy being described might just work.  But there was clearly something left unanswered.  Why must the client (after paying for professional advice) still be at risk and still endure the stress and fear that occurs every several years when the market tanks?

As I read this I couldn’t help but think, “I wonder when he is going to point the wisdom of including annuity income as part of each client’s portfolio.”  The author expresses great concern that he assures his clients that he will do everything possible to keep them from running out of money.  But, hey; no guarantees.

It is a fact that only the Federal Government, an insurance company and a lifetime annuity can guarantee the client will receive the most income with the least stress regardless of the rate of return…and guarantee it for life.  By omitting that option the planner must deny the client income they otherwise could spend so that they can stick to the 93% “probability” of success.  What should we say when 93% probability turns out not to be good enough, or the client suddenly needs to spend an extra $6,000 – $10,000 a month for long-term care during a down market and for an extended period of time.  I checked and found that the nursing homes were still over 90% occupied from Jan. 2008 – Dec. 2010.  I hope none of his clients were among the residents.

He expressed concern about “shedding AUM” in a broad down market and having to scale down services.  I am concerned about the clients who are sharing that risk and must scale down their standard of living.

Thought (a little story) for the week:

I met a couple at a charity banquet who, when I mentioned I do retirement planning, asked me for my opinion of a recommendation they were considering from a financial advisor.  They were both a little over 65 and they have “somewhere around $1million” in his 401(k) and other funds and income from Social Security.  He was having trouble “pulling the trigger” on the “conservative” portfolio being proposed.  As he tried to describe it, it sounded to me like a reasonable (and typical) suggestion for a couple their age but he was still unsure and she was very unsure.  After only a couple of questions I got an idea of their concern.  “Are you concerned that your assets could go down and you worry about running out of money? I asked.  He admitted to being somewhat concerned about that and she wasvery concerned.

I asked him, “has the advisor suggested a personal lifetime pension to guarantee income as long as either of you are alive?”  You guessed it.  Annuity income had not come up.  When I told them they could probably get income for life of about 6% per year, his wife quickly did the math in her head and said that would be about 50% more income than the advisor was suggesting.

As we had been called in to dinner I had only time to mention that I wouldn’t suggest putting all of their money in an annuity.  But perhaps they should consider enough to cover their basic expenses of housing, food and utilities.  I got the clear impression that would significantly improve their chances of pulling that trigger on the rest of the money.

She said she was going to ask the advisor how much his plan was guaranteed.  I asked if he had said anything about preparing for long-term care.  He rolled his eyes and she just shook her head and seemed a little angry. I’m thinking at this point, they may be “pulling the trigger” on him unless he can come up with something for them that offers a lot more security.

Thought for the day:

When I was growing up we didn’t have so many warning labels.  Guess we weren’t as stupid then.  –Gene Pastula



If you will read no further:

You have to read further because that is the only reason I am sending this out this week.

Important thought for the week:

Thought for the day:

“We have had our Biblical seven years of fat. (Now)We must look forward, almost by mathematical necessity, to seven figurative years of leaner: Bonds 3% to 4% at best, stocks 5% to 6% on the outside.”​​​​​​​​​  -Bill Gross (after leaving PIMCO)

If you will read no further:

I just watched an interview with a well-known financial planner who committed an unprofessional offense that I see all too often in our business.  When given the opportunity, too many of us take it to trash the other guy.  I listen to planners on the radio and find myself shaking my head when I hear some of them tell about how (unlike others in their community) they don’t overcharge or they do “Real Financial Planning” or they are more objective because they don’t “sell” you stuff like thoseothers do.

In this case the subject was how bad annuities are, and the “salesmen” (hold your nose) that rip off their clients who they suckered in with a free lunch. It is true that there are abuses in the insurance industry; but financial advisors who specialize in securities (free lunch or not) certainly have their share of perpetrators.  I believe that annuities are given a bad rap because most investment advisors do not understand them like they should, only see the bad ones, and after all, they feel they must compete with them.

Clearly there is a market and a legitimate use for these products because they are purchased by the billions each year in spite of a regular tirade by the press every chance they get. Academics from Harvard and the Warton School also endorse them and recommend them as integral parts of a well thought out retirement portfolio.  The clients want what annuities guarantee, Safe, Predictable, Dependable, Stress-Free Results.  Yes, that is what we as professional financial advisors want to offer as well, but we are not on the same playing field as the institutions who have $billions and a passel of actuaries on their teams.  It’s better for us and for our clients if we come to understand these products, how they work, how and why they fit in the portfolio, and why clients want them; and what is the difference between the good ones and the not-so-good ones.

Real Financial Planners have to quit trashing the products and the people who sell them; for then we put ourselves in a place that prevents us from using them when they are most appropriate.

And if Bill Gross is right, that time could come sooner than we would like.



Thought for the week:

Introducing the 529 Plan for Grownups
In 1996 as part of the Small Business Protection Act, Congress approved the Section 529 plan to encourage and allow parents to efficiently pay for their children’s education by saving money while they were growing up to help pay tuition costs for college.  The people who have taken advantage of such a plan expected their children would qualify and attend college and there would be many more affordable options if they were financially prepared in advance.  So, astute financial advisors began encouraging their clients to assure that they could afford the college of their choice, by saving before hand in a Sec. 529 Plan.

Paul planner is one of these astute advisors whose clients are clearly people who think ahead, anticipate their future needs and take intelligent steps to prepare for them in advance.  And Paul routinely points out to all of these folks that they must anticipate the potential need (statistically 70%+) for long-term care at some point during their retirement years.  (It’s interesting that these odds may be pretty much the same as those of their children going to college someday.)  So Paul educates them all on how to prepare for it, because the cost of care will possibly be much greater than that of a college education; and waiting until they retire to prepare is always much more costly and uncertain because of their health at that time.

Paul suggests the 529 Plan for Grownups*.  Instead of funding for college 529 Plan for Grownups funds for long-term care, not by purchasing LTCi insurance but by building an asset over time that will provide significant value when needed to allow complete financial freedom to choose the most desirable option to receive appropriate care when the time comes.

Paul suggested that Jason (46) and Judy (44) incorporate special life insurance policies in their investment portfolio that will also pay for long-term care when needed.  He showed them how, at their ages, this is not a big deal financially as they can just be part of the family’s life insurance program to pay a typical death benefit if the worst happens while they are still young; but by the time they retire the plan will be fully funded and in place to provide hundreds of thousands of tax-free dollars to pay for care if needed. If not, they can pass it on to the kids. In either event, the tax-free internal rate of return on this strategy will range from (believe it or not) over 500% to around 5% depending on when the need occurs.

Paul suggested that they contribute $15,000 per year for the next 10 years to this strategy. Once finished they would have a total of $1million to pay for their care or leave to their children all tax free.  That’s as much as $20,000 per month each if needed for care and whatever portion of the million is never needed for care can be passed to the kids, grandkids or given to charity. Actually, Jason suggested he fund his with one deposit from his bonus he will be receiving this year.  Paul showed him how it would reduce his total required deposits by $8000.

*Special thanks to my son Aaron for his idea

If you would like to see the illustrations referenced above or would like to see one for your client, send me a note at gene@westlandinc.com 

Thought for the day:
“Tact is the ability to tell someone to go to hell in such a way that they look forward to the trip.”  ​​​​​​ Winston Churchill

If you will read no further:
Think insurance is an expensive product? Imagine receiving the growth rate of the S&P up to 13% per year with no taxes and no loss in down years; and the average cost is less than 1% per year of the account value if averaging 7% per year.  Imagine if the return is higher, the cost actually goes down.  And it’s all tax free.  You need to call me to discuss further for your high income professional clients under 50. (800) 238-8144.

Thought for the week:
I have pointed out many times how frustrating it is to get a call from an advisor whose client has asked him/her to look into long-term care insurance.  All too often it turns out that they have been informed they have a chronic health condition that won’t get better and there is a good chance of needing nursing care before all is said and done.  But now it is too late to find an insurance company willing to commit to paying the bills.

Of course nothing is said but most of us suspect that the advisor never brought up the subject previous to this and probably felt correct in ignoring the issue because, “they could afford to self-insure”…which of course they can, and will; and I guarantee, no one will like it.

I recently addressed a question in the CFP All Member Open Forum concerning guidelines for determining “a need range” for long-term care planning.  My answer was as follows:

There is no “need range”.  Many of the folks who “need” long-term care insurance are those who could easily run out of money paying for care.  For the higher net worth individual the question boils down to “how smart is it to not suggest that your client write a check for $4000 each year to fund long-term care because they can afford to pay for it themselves?  Then eventually their family members must write checks for $8000 (or more) PER MONTH, (each month) to pay bills for care for perhaps several years.  That makes no sense at all….especially when you realize that each month of benefit reimburses a year of insurance cost.

“Self-insuring” only seems like a smart idea until you start writing checks for long-term care and realizing that the odds of doing this in the first place was 50/50 at best. That’s when the idea suddenly seems really dumb.

Insurance, the alternative investment for the retirement portfolio.
“Miss Client. I certainly can help you with building your retirement portfolio.  Let’s start with creating a Roth-type plan that will allow you to accumulate money tax free and receive an income-tax free retirement income.  With that and your 401(k) and your Social Security, you should be in great shape for a stress free retirement. The excess money you receive from bonus’ etc. we will use to build you a managed account and hopefully create some serious wealth.”

A few weeks ago I had the opportunity to talk with a woman who is the CFO for a high tech company in Silicon Valley.  She is 38 years old, single and makes almost $300k per year.  She is very smart and particularly inquisitive when it comes to investing for her future.  She has maxed out all she can do through her company 401(k) and doesn’t qualify for a Roth IRA so the rest of her investing will require active management and creative options. She had been exposed to the concept of the Roth Alternative using max-funded, index-based life insurance policies and was referred to me as someone who could answer all of her questions.

She was attracted by the insurance because it offered  a more predictable result.  Once the plan is put in place, she can accumulate large amounts with annual savings, get a reasonable return with safety and still access money from the account any time and all without tax and government restrictions.  And when it’s time to retire, she will receive a healthy tax free income.  Plus any life or chronic care insurance needs she might ever have will be included.

She asked me to show her what she might expect from this strategy over time.  I suggested that she use two carriers for this; first to provide basic diversification and also to add some additional flexibility to her strategy should her situation or desires change downstream.   Both are top insurers, highly rated and both offer a current crediting rate on the cash value equal to what the S&P increases each year (not including dividends) up to 13%. Also she is impressed by the low costs and the complete downside protection on the S&P with this strategy.  All upside and no downside is very compelling.

Imagine receiving a crediting rate up to 13% per year with no taxes and no downside risk; and the only cost is what she must pay for the contract fees and pure insurance included in the deal.  Click here to see the illustration I prepared for her. Then let’s talk and I will explain how her costs are less than half of what she would normally pay.