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Comparison of Alternatives

Life insurance has many uses; however it’s primary purpose is to provide financially for a family in the event of death. Additionally, life insurance can serve may other needs, among them providing accumulation of funds and supplemental retirement benefits.


Your clients have a variety of options when it comes to planning for your family’s future. Let’s discuss the potential advantages and drawbacks of the most common strategies.

Taxable Investments (Brokerage accounts, private equity, rental property, royalties, CD’s): Certain taxable investments can provide liquidity for retirement income and other financial needs, as well as the ability to diversify your portfolio. Yet, income and capital gains taxes can reduce returns.


Tax- Deferred Accumulation Vehicles (Annuities): Tax-deferred products offer the power of tax-deferred growth and the ability to diversify. Any withdrawals taken prior to age 59 1/2 are generally subject to ordinary income taxes, plus a 10% federal tax penalty. What’s more, all capital gains are converted to ordinary income at distribution.


Qualified Plans (401k, SEP, traditional IRA, profit sharing): Qualified Pension Plans and IRAs are probably the most popular accumulation vehicles available today. They offer tax-deductible contributions and tax-deferred growth, two very important considerations. However, there are drawbacks to qualified plans:


1. Income at retirement is fully taxable. Early withdrawals may also be subject to penalty.

2. Regulations limit how much you can contribute on an annual basis.

3. Distributions are required at specified ages.


Indexed Universal Life Insurance: We are weathering turbulent economic conditions these days. Given the debt crisis, we are seeing increased volatility in all economies.

As a result, fixed income products have been adjusted to provide such weak yields, they may not even keep pace with inflation, let alone accumulate assets for retirement. Additionally, those planning for retirement may be uneasy about exposing their finances to these fluctuations.


An Indexed Universal Life Insurance (IUL) policy may provide the opportunity to increase the Accumulation Value within the policy without exposing the Accumulation Value to downside risk.


An IUL policy offers multiple one-year Indexed Point-to-point Strategies to determine the interest, if any, to be credited to your policy as well as a Fixed Account Option.


Indexed strategies use the performance of an index, between specific time frames, to determine the interest rate applied to the policy, which may be subject to limitations, such as a cap or specified rate.


A fixed account will earn interest at a rate periodically determined by the company. Interest is calculated using a compound method assuming a 365 day year and is credited at an annual effective interest rate. Any surrenders will reduce the amount of interest credited to your policy.

Demographics: Anyone age 30-60 who wants to save money for retirement.

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