5 Huge Problems Educators Face With Retirement Planning & How IUL May Help: BLOG
July 27, 2017 by Blake Neben
Let’s face it, the second quarter is gone and you’re probably thinking to yourself “what can I do to generate some more profitable sales opportunities for myself this year and not repeat the same level of production from last year. Does that sound right? If you’re like most of the insurance agents and financial planners across the country, you’re always looking for new ways to help your clients solve their problems and make money while doing it.
Let me set this story up for you and in the end you can be the judge of whether or not this is a fit for your business……
A few months ago, I was sitting in my office and received a phone call from one of my top producers from Louisville, Kentucky, who specializes in fee-based financial planning for his clients. Ed is a successful advisor who has been able to generate great returns for his clients over the years but also understands the importance of having safer alternatives that provide tremendous meaningful tax-free growth with no downside to the market.
Ed explained to me that he was getting ready to take a trip up to the a large state university in Michigan to speak with six of his current investment clients about an alternative approach to saving money for retirement that would tackle five of the most critical gaps in their current employer retirement savings accounts:
1) Opportunity for Meaningful Growth
I’m sure we all understand that in order to even start talking about saving money for retirement there has to be an opportunity for meaningful growth. Whether the professor is enrolled in a TIA-Cref plan, 403b or other type of qualified plan they certainly have to have the opportunity for meaningful growth in those types of vehicles, but at what cost?
2) Protection of Funds from Market Loss
As stated above the opportunity for meaningful growth is very important to having the money you need to retire. But on the other side of the spectrum what are they doing to diversify their funds to provide for the downside protection when the market makes a turn for worse. Most would say that they put their money into CD’s, Money Markets, Savings Accounts, maybe even bonds. While saving money is great most people would prefer to see their money have a better return than 1 or 2%. What we’ve found is that most of the agents and financial advisors haven’t even looked into using an indexed universal life as an alternative due to lack of knowledge or experience with the product.
3) Tax Free Accumulation & Income
This might be one of the most important areas that the educator market and some of your other clients who are enrolled in an employer sponsored retirement plans are overlooking. What’s that you ask? The TAXES!!! Many of these educators haven’t even thought about the huge tax liability they are creating for themselves. They don’t understand that by over funding their qualified plan they are deferring a big pool of taxes and what they thought they might have for money in retirement might not be what they get.
Deferring taxes until later means you might pay more money to Uncle Sam. The government has created tax codes such as the 401k and the IRA so they can get their piece of the pie and eat it too when educators ready to retire. I’m not saying that educators shouldn’t take advantage of a strong match from their employer, but why over fund this account when all they are doing is creating less income for themselves when they need the money most. We have found this talking point to be an extremely useful tool in explaining why Life Insurance is such a powerful tool for saving money.
4) A Self Completing Approach with Death Benefit & Living Benefits
I won’t go into too much detail here but most schools offer some sort of a group plan for life insurance/ LTC Protection that is barely enough for their families to survive should they pass away pre-maturely or need to use their benefits for LTC protection. If you go to most of the school websites in your area, most of the time you can find their benefit packages. There are many ways you could address this issue using questions like:
- “If you were to pass away today would $150,000 (403b account balance as an example) be enough to take care of your family’s every day needs?”
- “If you don’t believe in life insurance, which asset would you want your family to spend down first when you’re no longer here? Do they know that the money from your qualified plan is taxed?”
- “What if the market crashes and the money you thought you had isn’t there when you’re ready to start taking income? What would you do?”
Questions like this can be a great way for you to get some emotional buy-in from the prospect and get them thinking.
5) The Control and Flexibility
Many of the educators that we have spoken to expressed that control and flexibility are key for them. They want the ability to access their money at any time without being penalized. We have spoken to younger educators that have a lot going on in their life and by having all of their money tied up in their employer sponsored plans really limits their ability to access the cash when they need it. By providing a solution that gives them a bucket of money that they control makes them feel better in those unexpected situations.
