Specialist in Life, Disability and Long Term Care Insurance
631.923.1595 ext. 342
G.R. Reid Consulting Services, LLC
Living with Whole Life Insurance
A few weeks ago we published a post with an overview of Whole Life Insurance, briefly demonstrating how it works, what makes it an asset, and why it can be a powerful asset for any individual or family to own. In this post, the G.R.Reid Consulting Services Insurance team would like to expand on Whole Life Insurance as income replacement and how it plays an essential role in helping to create a retirement strategy with less stress.
Whole Life insurance has a permanent guaranteed death benefit. This is the most
important aspect of the product. There are major two reasons for acquiring the proper
permanent death benefit: (I) income replacement and (II) estate replacement.
I. Income Replacement:
A bread winner should have the correct amount of insurance to protect against his/ her death so as to prevent their heirs from having to deal with a financial devastation.
The following is an example situation:
If a breadwinner makes a salary of 120,000 dollars yearly, their death benefit amount should be 3 million dollars or more. Now we can explain why. After the death of the insured the beneficiary receives a lump some payment and in this case, 3 million dollars. Investing the death benefit conservatively in a vehicle that provides a 4% rate of return, the beneficiary will be able to draw 120,000 dollars from that investment yearly as income, without touching the principle of the benefit. In this case, the breadwinner’s income has been fully replaced. At G.R.Reid Consulting Services, we believe that it is financially irresponsible to not have the proper protection in place for our clients’ family members. Furthermore, by adding permanent insurance to our client’s financial portfolio we help prepare them for maximum asset distribution when it is time to retire.
II. Estate Planning:
Whole Life Insurance can truly change the way that our clients view their retirement. By purchasing the correct amount of permanent Insurance our clients will be able to live comfortably, while still leaving their heirs with a sizable estate.
The following example demonstrates that fact:
Client A plans to retire at 65 years of age. By that time his estate will be worth 3 million dollars and they will have two children who are college graduated. He has always planned to leave his children with a large inheritance, but still would like to enjoy retirement. Client A’s investment accounts are generating a four percent rate of return leaving an annual taxable amount of 120,000 to live on in retirement, plus social security. Client A has grown accustom to living life with at least an income of 250,000 yearly. How will he and his wife be able live with about half of that amount and not invade principle? Statistically retirees use just as much income in retirement as they did while they were part of the working force. Not to mention, the biggest unforeseen asset depletion in retirement, extended elder care when in most cases Medicaid will not assist; families can be bankrupted by out of pocket costs of Long Term Care.
By owning Whole Life Insurance and by having a permanent death benefit of 3 million dollars to replace their estate they do not have to worry about living off of the interest of their assets. Client A can cut into his principle in order to generate much more than 120,000 a year from which to live. Furthermore, the cash value of the whole life insurance policy will be growing all the while, creating even more disposable income in retirement and if Long Term Care costs eventually did deplete the estate, the permanent benefit will always remain to replace it entirely.
The Insurance team of G.R. Reid Consulting Services has the goal of making sure that our clients have the best insurance coverage now and far into the future.
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