Learning how to sell tax-free retirement can be a daunting task when you try to do it on your own.
OK, for those of you who missed our recent training on how to sell tax-free retirement, you are in for a treat. We have been conducting tax-free retirement and have compiled six keys to helping agents get comfortable with indexed universal life insurance (IUL).
If you are just looking to know the bare bones info, tax-free retirement is a retirement savings strategy using IUL to grow cash value which can be accessed tax-free in retirement. If you really want to know the nuts and bolts and continue becoming an established thought leader in your community focused on life, health, and retirement, then stay with me for a few minutes.
Before I dive into the good stuff here is some language we used this morning on our training call:
“Tax Free retirement is alternative to traditional retirement savings such as a 401K, 403B, CD, and various investment accounts.”
“Do you agree that tax free money is better than taxable?”
This is really strong stuff and gets at the cold, hard truth of what tax-free retirement really is: an alternative to traditional retirement savings. I would use this word for word when you are educating your clients on tax-free retirement.
Clients have lots of questions about tax-free retirement. The number one reason is all they have heard their entire lives is stock market, stock market, stock market. The good news is there are great alternatives with much lower risk.
So, let’s dig in…
We did a fantastic job in this morning’s training of ripping the mystery out of tax-free retirement. Many insurance producers rarely venture outside of traditional term life insurance because they believe there is a level of mystery associated with permanent insurance such as IUL and whole life (WL). Does this sound like you?
We encourage our insurance producers to take a risk, get uncomfortable, strap in and enjoy the ride. The insurance producer that is willing to face their fears is the one that will continually grow their book of business in financial services.
Below are six important facts about tax-free retirement:
- There are three main types of options to save for retirement.
- CD’s – CD’s are a safe option typically offered through banks and credit unions. CDs offer steady growth and are a very safe option.
- Investments – Investment examples may include 401K, 403b, 457, and traditional IRAs. These are market-based growth tools that offer tax deferral. Market-based investments offer high growth potential but also carry higher risk. A great point to remember is that a 401K, 403b, 457 is a qualified wrapper that can be funded with a CD, investment, etc. The 401k, 403b, etc. is not the actual investment.
- Life Insurance – Using permanent life insurance such as an IUL for cash accumulation is a lower risk option with high return potential. IUL offers more flexibility for tax-free income than its more well-known cousin whole life.
- Life Insurance – Tax-Free Retirement not only offers access to a tax-free income but also a tax-free death benefit which can be used for legacy or estate planning. This is important for the insurance producer to note when talking with their client. Not only can you fund a tax free income but you are offering protection for your client’s family in the event of an untimely death.
- Living Benefits – This is a hot topic in the insurance and more life insurance companies are offering clients the ability to access their policy’s death benefit while they are still living. An example of a living benefit would be a terminal illness rider which has no upfront cost to the client. If your client is diagnosed with a terminal illness such as cancer, they can access a portion of their death benefit to use while they are still living. The remaining death benefit will be paid out to the policy beneficiary at time of death.
- Restriction on contributions – This is a big deal when you consider the annual limitations clients have on contributing to their retirement plans to products such as IRAs, 401k, 403b, etc. When using IUL for tax-free retirement, clients can exceed the ERISA thresholds. Agents should always make sure contributions to the IUL do not exceed the limits to create a modified endowment contract (MEC). Simply said, you can contribute larger amounts to a tax-free retirement plan than the other traditional retirement strategies.
- No Restrictions on Early Distribution – Unlike traditional retirement plans which have penalties for early withdrawal before age 59 ½, IUL cash value can be accessed at any point it is available to the client. The agent must make explain the details of accessing cash value in the form of policy loans.
- FAFSA Income Limits – It is important to know that when using an IUL for college savings plans the cash value doesn’t count towards the income or asset calculation for FAFSA. This creates a great scenario for individuals to use life insurance to save for college while also allowing access to financial aid. This is a win-win.
See, I told you we would help you uncover the some of the great secrets of using IUL for tax-free retirement. It is not as complicated as people make it out to be. The more you talk about it, read, illustrate, embrace, and incorporate it into your business, the quicker your clients will view you as a subject matter expert.
Our ongoing training is designed to facilitate thoughts, drive discussion and further educate yourself so you are providing maximum value to your clients. At the end of the day it is your responsibility to educate your clients on what they are entitled to in the financial services business. Knowing these six facts will help you sell more tax-free retirement cases and build stronger relationships with your clients.
So what’s next?
Contact us today and we will provide you with step by step guide to selling tax-free retirement. This includes a presentation, script and marketing piece you can leave with your clients to further reinforce you are the expert they should be working with. We support the independent insurance producer and financial advisor through our weekly training, blogging, mentoring and coaching. We are dedicated to helping you succeed.
Thanks for reading and let us know if you have any questions.