Are your clients ready for retirement?
It’s no secret that retirement is a hot topic for adults as we watch more and more Baby Boomers retiring with every passing day. Plus, with the discussions regarding the state and longevity of Social Security paired with rising healthcare costs, it has a lot of people worried.
But, there are other options that many aren’t aware of beyond just the regular retirement savings plans.
As insurance plans change, people are finding new ways of saving for retirement alongside the old faithful 401Ks, IRAs, and savings accounts. One of the main benefits people are finding is that with certain health policies and life policies, they can spread their retirement planning throughout their policies instead of solely relying on that 401K contribution alone. This provides them with extra savings for the future and helps offset those healthcare costs that can skyrocket throughout retirement.
Before we get into how health and life policies can help with retirement planning, take a look at the following infographic to familiarize yourself with how U.S. adults are saving and how they are feeling about their own individual retirement projections:
At the bottom, you’ll see a box to share this infographic. Feel free to post this on your own agency’s blog to share with your audience about the state of retirement saving and planning in the U.S. to help start conversations about different plans and all the benefits that can come with each.
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Health & Life Policies for Retirement
Above, we discussed the fact that there are health and life policies options available that can work alongside regular 401k, IRA, and personal savings for retirement. However, these opportunities are widely unknown to the majority of your audience right now since a lot of these types of policies are relatively new. For example, people aren’t as aware of the tax benefits and retirement benefits that come from HSA plans.
I always point to the virtue of the HSA from a tax standpoint. If you stack it up compared to a 401(k) or an IRA, it's going to come out ahead.
—Christine Benz, Direct of Personal Finance for Morningstar
Many see these accounts as “flex spending accounts”, which is more than applicable, but fail to see the additional benefits of maxing out their contributions and using their pockets for the bills. Of course, this isn’t feasible for each person, but it’s worth the discussion to alert them of the potential benefits and additional options they have beyond a simple flex spending account.
Likewise, many are under the perception that all life policies are only paid out when a death occurs. This was a fact I believed, too, before I really started searching and planning my life insurance.
When properly structured, life insurance can provide tax-deferred growth, tax-free cash flow, and a tax-free death benefit.
— Russ DeLibero, CFP®, ChFC®, CLU®
Options like “permanent life insurance plans can offer benefits that supplement retirement accounts by building a cash value alongside the additional death benefit.” However, it’s important to note with life insurance policies, your clients must be careful with how they withdraw. And the borrowing can drastically affect the final death benefit. But, with careful planning and smart usage, your clients can find significant benefit from going this course.
It’s also crucial to stress to them that not all life insurance policies have this capability. Frankly, life insurance wasn’t created to fund retirement, but as policies have evolved and the way we invest continuously grows, these opportunities have opened. Clients just need to be very careful and diligent with this course of action.
What can you do?
So, with all of this information, what’s your next step?
- Educate yourself and/or
- Partner with a financial planner
Educating yourself is crucial to be able to educate your audience about all the benefits of using health and life policies for retirement. Of course, like anything else in the insurance industry, it’s not all straightforward, so you’ll want to ensure you know what you’re doing before you have clients following your advice. Make sure you’re well aware of the different pitfalls and rules to ensure that your client is aware, well matched with the plan, and armed with a plan of how to proceed.
To get some information about the benefits of using HSAs for retirement, here are some good articles to start:
To start with using life insurance as a retirement benefit, here are some insightful articles to start with:
Another great option is to partner with a financial planner. If you don’t feel comfortable or simply don’t want to diversify into the financial products side, then partner with an expert and send your clients there. Just because they can use health and life policies as retirement savings doesn’t mean they’re going to nor does it mean it should be their only source of retirement savings. In fact, they should definitely also invest in a 401K, IRA, and/or personal savings account.
By partnering with a financial planning professional, you can create a steady flow of business referrals back and forth that benefit you both. And you don’t have to pair with just one! You can have a few in your arsenal that specialize in different types of financial planning to ensure they are the best match possible for your client.
Regardless of which path you choose, both a great way to boost your bottom line because you’ll increase your likelihood of retention (they’ll trust you more) and bring in more referrals (they’ll tell their friends/through the partnership). Both are a win-win for you and your agency!
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