Everyone wants to preserve as much of their wealth as possible, but that can be hard to do as you enter retirement and start living on a fixed income. While many accounts used for saving retirement funds offer some form of tax benefit, few can match the tax perks provided by a dedicated life insurance policy.
Many consumers may be unaware of how life insurance can lessen their tax burden and provide improved retirement income. Financial professionals must directly address tax concerns with clients, as this can be a key differentiator between life insurance and other investment or retirement saving options.
Assuaging client fears
Consumers are most worried about running out of money during retirement, according to a survey conducted by the American Institute of CPAs. The majority of consumers listed this as their top retirement concern, and that should be a signal to producers. By demonstrating how life insurance products can provide cash value that can be accessed on a tax-free basis in retirement, financial professionals can set consumers’ minds at ease.
Taxes may be a serious concern for consumers who are not fully clear on how their retirement accounts and savings will be taxed. Financial professionals will want to explain the different taxes that affect specific retirement and investment accounts, and should explain how these accounts differ from life insurance.
The tax difference
Most investors understand that a balanced portfolio with several different asset types is preferable to other alternatives, but it can be difficult to decide on a specific mix of assets. Financial professionals should be unwaveringly clear that life insurance offers the ability to grow cash value on a tax-deferred basis while also being able to access the value on a tax-free basis. It has one of the smallest tax burdens of any retirement savings options and these policies lack the contribution limits that can handicap other savings plans.
Together these factors make life insurance extremely appealing, particularly for individuals who are concerned about being unable to leave money for their beneficiaries following a lengthy retirement.
Financial professionals have the opportunity to be educators and provide consumers with the deep understanding of taxes and life insurance policy options that will give clients confidence as they leave the workforce.
Latest posts by Highland Capital Brokerage (see all)
- July 2018 LTC Newsletter - July 26, 2018
- June 2018 LTC Newsletter - June 21, 2018
- Robert W. Finnegan, J.D., CLU®, Published in Trusts & Estates Magazine - June 6, 2018