Redbird Q&A: Tax Free Retirement
Reading time… 6 minutes
Higher tax rates are coming… there is no doubt.
At no time in recent memory has there been so much uncertainty about tax rates… that is, uncertainty about how high taxes will actually go. At about $17 trillion and growing, the U.S. debt problem will require severe measures and there’s little doubt the federal government will continue to ratchet up tax rates as one of its hammers to solve the problem.
We reached out to one of our most trusted advisors, Rusty Carlson from American Financial, to get his take on the opportunity for tax free retirement.
Rusty is going on 27 years in the insurance business, the first half of it beating the streets “pickin’ and grinnin’” selling life insurance and the second half on the phone several hours a day helping agents solve problems. He spent five years at the Allianz home office and then the last six at American Financial focused on life insurance. Rusty is one of Redbird’s go-to guys when it comes to case design.
Redbird: The time feels right for tax free retirement, but why isn’t there more buzz about it?
Carlson: A lot of advisors simply haven’t taken the time to understand it; they aren’t educated about it. Many of them make money on investments, taking money away from the tax free environment.
More people are utilizing life insurance in the last year when they see power and benefits. Really, they are flooding to market. People are tired of always having to regain the value in their investments.
Redbird: Other than the obvious tax free benefits, what feature really gives these products a unique place in a client’s portfolio?
Carlson: It’s the annual reset, whether you’re looking at an indexed annuity or an indexed life product. It gives you a higher potential for gain with a lower amount of risk. Really, you’re only risk is a zero return. For the client, the message is that they don’t participate in the down (markets).
Redbird: What’s the discussion like in the home with the client?
Carlson: I’m a life guy and I believe when you’re sitting with a family there are certain things you have to discuss when the breadwinner dies. The tax free retirement product is for cash accumulation; the potential for gain and no loss in the market. The death and chronic illness benefits are icing on the cake.
Redbird: You say to keep the discussion simple but there are a lot of complex products under the hood. How does an agent keep it simple?
Carlson: The product can become complex. Most clients don’t care how the watch is built. They need to know you know how the product works and that you are giving them what best fits their wants and needs. (Editor’s note: Rusty has a unique exercise he takes clients through where they answer a short series of questions that work up to a conclusion regarding their needs and the risk they are willing to take with taxes. He will be happy to share.)
Redbird: What do you say about the opportunity to agents who are new to this part of the life business?
Carlson: Guys with a book have a great opportunity, even the guys who have primarily sold just one or two products. With tax free retirement products, now there is a reason to call that client who bought the med supp and do a needs analysis for them. In the case of older seniors it might be too late for this to work well, but you can get referred to their kids. That’s power of client reviews.
Redbird: What are the levels you’re seeing for an average sale?
Carlson: The average that we’re seeing is $8,000 to $15,000 in target premium, which means the client is putting in somewhere between $10,000 and $30,000 per year.
Redbird: Who is the perfect client for tax free retirement solutions?
Carlson: Small business owners are huge because they have buy-sell concerns and everything they have is invested in a business that may not be sellable later. Many of them haven’t taken the time to think about it. There are so many options for them.
I also like the 20 somethings. Some of them are very focused on their future and many of them want to get out of the traditional mindset of IRAs and 401Ks.
Redbird Chirps
- James Gandolfini’s $30 million mistake. Never assume those with the most make the best decisions. James Gandolfini’s lawyer has revealed that 80% of the late actor’s estate was unprotected from estate taxes, with rates that will add up to about 55% when you add federal and state taxes together. He owes the state of California somewhere in the neighborhood of $30 million from his $70 million estate. It didn’t have to happen. Never be afraid to ask the obvious questions even to those who you might assume have done all the right things.
- Sagicor introduces significant upgrade to its automated underwriting capability. Called Accelewriting, the new capability dramatically speeds up each stage of the policy approval process, from application to policy delivery. We’ve seen it in action and it will greatly simplify and speed up the entire process. Learn more about Sagicor here.
