The MFGS Chronicle – November Newsletter
Saving for Retirement
When You’re Young
If you ask anyone who is approaching their sixties and furiously trying to build retirement savings from scratch, chances are they will agree with the sentiment, “I wish I had started saving for retirement earlier.”
The importance of starting early is seen in this numerical example. Suppose that you put away $10,000 per year for retirement on each of your 30th through 39th birthdays, a total retirement savings contribution of $100,000, and then stopped saving. Suppose that in contrast, your neighbor puts away $10,000 per year on each of his 40th through 64th birthdays, a total contribution of $250,000. Who will have more money accumulated for retirement at age 65?
The answer – if the money is growing at any interest rate of 8% or higher – is that the person who saved $100,000 in his thirties will have $1,071,477 and the person who saved $250,000 starting just ten years later would have $731,059. With $150,000 less money and 10 years earlier would have $340,418 more money than the guy who started 10 years later and save $10,000 every year for 25 years.
So, starting earlier is better.
So is picking the right product to stash your retirement savings. For many of my clients, fixed indexed universal life insurance has been a great retirement planning solution.
Death benefit protection: A life insurance plan can provide the retirement fund accumulation that you need, along with a death benefit to provide for your family if there is a premature death. And since you’re young, the cost of the insurance protection is quite modest.
Protection from future tax rate increases: With a life insurance plan, you have the ability to create a tax-free cash flow in retirement using policy loans that are ultimately repaid by a portion of the death benefit. And the entire death benefit is paid free of income taxes.
Safe accumulation: A fixed indexed universal life insurance plan credits interest to your cash value based on a market index. If the index increases, you earn interest credits based off of the amount of that increase. If the index decreases, you are protected from the decrease. You are not subject to investment risk.
You may have never considered life insurance to be a retirement planning solution. When you more closely examine the benefits of fixed indexed universal life insurance, you just may find you’ll want to use it for this purpose.
Wayne McLeod, Safe Money Adviser
Affiliated with National Brokerage
The information provided here has been taken from third party sources and is deemed to be reliable, but is not guaranteed.
It is provided for informational purposes only, and you should consult with a tax adviser for further information.
Our organization does not provide tax advice.