What I want to talk about today is the unique advantage that business owners have regarding life insurance as an investment tool. No! I am not talking about Whole Life. The argument of whether Life Insurance Sacramento can be a good investment is one that will continue to go on as long as birds fly. My answer on whether certain life insurance products are good investment is “sometimes”, and here is one of them.

 

Let’s take our old forgotten friend “Joe the plumber” and let’s say that Joe has four young plumbers working under him. Joe’s business is going well, his bills are being paid, and he currently has a wife and two kids. Sound familiar?

Now Joe is in a bit of a difficult situation because he wants to put a retirement account together for himself and his family. He has looked at setting up a 401K through his business but he didn’t know that he legally has to make contributions for his employees. His contributions are regulated by how much each of they can allocate out of their pay checks, so things look a little dimmer than ideal. His employees are young and not as organized, only two of them are able to put money into a retirement account at all, if one was set up.

 

 

Joe’s combined household income is too high to open an IRA, but even if it wasn’t, Joe would like to be able to contribute more than $5,000 per year when possible. So there is a painted picture of Joe and though it might be slightly different from you, the principals remain the same.

 

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Many business owners face retirement situations like Joe. Without being regulated by tax laws they simply want the ability to put earnings aside for themselves.

This program can be very effective for both you and Joe.

 

It has been found that when set up properly, an Equity Index Universal Life Insurance policy can satisfy these needs and provide a unique income tax shelter for retirement years.

How? First off let’s be honest and clear about underwriting in regards to life insurance. This product may not be in your best interests if you have health concerns or smoke.

If you are 55 years old or less and in good health then by all means, read on! Here is how it works: We (the agency) design the insurance plan around the monthly amount you can contribute toward your retirement fund. The insurance amount is secondary and is just a vehicle for tax shelter.

There is a tax law that is over 100 years old, that gives this program its defining attribute. It allows the insured (you) to put moneys into the insurance policy, not to exceed the face amount of insurance. Ok! Our logic as agents is that we simply max out the insurance policy. The premium you pay is actually the most you can pay for that amount of insurance and therefore allowing more money to be invested towards the cash value.

 

Let’s take a quick break to understand the pros and cons of a product like this:

 

Pros 1. I don’t have to contribute towards my employees retirement (saved money)

2. I don’t have any age 59 ½ restrictions on getting the money (life insurance attribute)

3. I can pick how the money is allocated just like a traditional investment. (market, index, or fixed)

4. If I die my survivors receive the insurance (always greater than the amount you invested in the first place)

5. The income when I pull it out is completely tax free. ( As long as you stay within the tax guideline)

 

Sound pretty good! And lets be honest, these pros and all assuming your insurance agent set the program up properly. The premiums are flexible from month to month, or year to year. So you can decrease the amount you are funding if you need and when your ready to overfund the program you can increase premiums at well.

 

What should I know about this product?

 

Cons: 1. There is a cost of insurance associated in the investment (it’s less than contribution in a 401K, much less!!!) (if you are not very healthy we should compare other products)

2. If I make an early withdraw in the first few years am I at risk (yes, this is a long term investment, with certain surrender penalties) (always ask the what ifs!!

3. If I need to roll the money over to another company I can (Oh wait, that’s a pro :)

 

So that’s really the only two things to be careful about: make sure that this account is not your emergency money, this is a retirement fund, not a ten year cd. It is not Term Life Insurance Sacramento. Most retirement plans take nearl y 20 years to show maturity and decent growth. So be thourough when out there shopping.

And secondly, knowing how the product works in tune with the insurance is imperative. The healthier you are and the longer you let this product grow, the better it will do for you.

 

In closing, most small business owners have not seen this approach to retirement planning and I felt it necessary to give an overview of how we like to address it. Of course if you have any questions, or if you would like me to forecast this for you beside another investment you have, I’d be happy to.

 

God Bless.

 


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Term Life Insurance Sacramento


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