Thought for the day:

Wisdom is the reward you get for a lifetime of listening when you’d have preferred to talk.

 Doug Larson

 

 

If you will read no further:

When allocating money in the portfolio for future health emergencies or for loss of retirement income due to the death of a spouse, the best, most predictable rate of return will probably be realized by using a life insurance policy for that purpose.

 

 

Thought for the week:

I was recently visiting with a prospective client who attended one of my workshops on long-term care.  I was showing him how to use life insurance to provide extra monthly income to pay for any care he might need while providing extra security for his wife to replace lost social security income if he was fortunate enough to dodge that bullet.

Because he is still interested in building his estate for the future (he is 55 and his wife is 10 years younger) he is always on the lookout for impressive investment strategies.  He understands investing in a managed portfolio of stocks, bonds and alternative investments; and he has an investment advisor taking care of that.  But he was intrigued by my approach of using life insurance to pay LTCi bills and was interested in what else it might do that he wasn’t aware of.  So I showed him a universal life policy that would provide $500,000 to his wife when he dies; or if he ever needed convalescent care, he could tap it for $10,000 per month of tax free income to pay for an in-home caregiver for over 4 years.

He thought that the $6000 per year premium investment was certainly doable, but wanted to know how the return (IRR) compared to the 7.7% that his planner had been averaging over the years.  I showed him how the rate of return on his “investment” would depend on when he (or his wife) ended up receiving the money.  For example, if he was unfortunate at age 75 and collected a benefit (long-term care for himself or the death benefit to his wife,) the tax-free rate of return would be 12.04%.  At 85 it would be 5.82%.  His comment to me was, “ya know?…after taxes and fees about what I’m getting now”.  I suggested that if he wanted to max out the IRR all he had to do was die soon!  He smiled, but I don’t think he thought it was very funny.  He actually had another thought in mind.  His 80+ year old mother would probably need long-term care someday and he is planning on taking care of it; but if something happened to him before then, it would be nice to have this money for mom’s care.

While we were filling out an application for the insurance policy, he commented that he wondered why his financial advisor had never suggested anything like this.  I told him I couldn’t answer that, but I had recently read an article in an investment news publication that a survey by The Futures Company, an industry research and consulting organization, found that a majority of middle aged folks admitted they were underinsured and that most were very open to discussing how to fix it. 

It has been my experience that when they know what these modern products can do, they are much more interested in putting one in their portfolio.  Why not make an early New Year’s Resolution to consider what role life insurance can play to address the various issues that concern each of your clients and call Randy or Nancy here at Westland (800)238-8144 to assist you with a strategy for them.