April 19, 2023; Duration: 08:18
A recently published study claims that taking income from permanent life insurance and annuities in retirement can create a better outcome for investors. Ernst & Young compared five different strategies including investments only, investments and term life insurance, permanent life insurance and investments, deferred income annuities, and a combination of #3 and #4. In their comparison, Ernst & Young considered insurance products part of the fixed income allocation and bond replacements. They also used the permanent life insurance as a volatility buffer, where they access the cash value of the policy to pay for lifestyle needs during periods of market volatility, similar to the concept in the best-selling book, The Volatility Shield. They ran 1,000 Monte Carlo comparisons with the goal of measuring sustainable income, and they used ordinary income tax rates. Each income scenario sustained a minimum of 90% probability of success. In the investment-only approach, it’s only inefficient for the investor and can be expensive for the client. But when core bonds were replaced with permanent life insurance and deferred income annuities, the probability of portfolio success increased substantially. A key takeaway is that a diversified approach incorporating permanent life insurance as part of your fixed income allocation may improve retirement income sustainability. For Gainesville, Florida residents approaching retirement, reviewing your asset allocation and considering how different vehicles work together is an important step. Learn more about Heritage Financial’s retirement planning approach to see how a coordinated strategy could benefit your situation.
Listen to Episode This content is for educational and informational purposes only and does not constitute direct legal or tax advice. Discover Heritage Financial’s holistic planning approach to learn how retirement, tax, and investment strategies can work together under one roof.
