https://youtu.be/oclhWRkYfW0
In this video, CEP and owner of Senior Financial Security Jean Dorrell talks about why life insurance may be a smart investment for your portfolio, in addition to discussing being a full-service financial advisor and some other interesting investment advice.
Being a full-service investment firm means that we can do anything. Stocks, bonds, mutual funds, ETFs, IRAs, annuities, insurance, etc. An important part of what we do as fiduciaries is to get into the nitty gritty of what your risk tolerance is or is not. As an example, I’d like to share a little bit about Dan’s and my risk tolerances and how different we are. I’m very conservative, which is probably even an understatement, because I worked so hard for everything I have, and I don’t want to lose it. I want to preserve wealth first and foremost. The gains are not as important to me as the risk. Yes, of course I need growth, but not at the risk of losing principal. Dan, on the other hand, is very risk tolerant. He’s the type of person that likes to drive 90mph in the 75mph lane. You almost couldn’t get two more different people in a relationship than us.
That’s where something like downside protection comes into play. If you’re like me and you want some downside protection, we do offer that, however it’s not for everyone. Statistically, probably half of our clients have some sort of a downside protection plan. And then we have some clients that come in who want to ramp it up all the way, to be on that rollercoaster. Some clients have all downside protection and no risk, and then some of them are all risk. Each plan is customized based on your risk tolerance in order to work best for you.
This leads us to our specially designed life insurance, and how we’re different.
When it comes to life insurance and you’re working and you have a mortgage, a spouse and kids, you tend to think of it as a vehicle to take care of everything and provide your family with a way to survive if you die suddenly. That’s the old type of life insurance. When we’re talking about retirees and life insurance, we’re talking about something completely different. I don’t have any children, but I have specially designed life insurance because I’m working and I make too much money to put into a Roth. The Roth IRAs are good to use as contributory programs when you’re working, but the government doesn’t want us to have all these tax-free vehicles, so they limit what you can contribute based on how much money you make. In my case I don’t really qualify for Roth IRAs unless I was to convert to a retiree with no earned income. To do so, you can take your traditional account and you can convert part of it to tax free and just pay taxes on what you turn it to.
I did some of that, especially in 2010 when they gave us three years to pay the taxes, I converted a lot to my Roth, but it still wasn’t enough. And I could foresee the future of taxes going up. Especially now you can see that happening with all these things we have to pay for, so my question was how could I get more tax-free money faster? That’s where the specially designed life insurance came in. Ultimately, you’re not really buying that for a death benefit. You can if you want to, if you specifically want to leave a tax-free death benefit you can buy it for that. However, we really do more of the tax-free Roth on steroids type of life insurance. Meaning that, again, the government doesn’t want us to have tax-free vehicles unless they add limitations or hoops for us to jump through.
With the specially designed life insurance, one of the big hoops is, it has to have a death benefit. Remember that when you get older, if you’re paying for a death benefit, it’s expensive. What we do in order to get around that is use IRS code 7702. It’s nothing new, but it is very complicated, and not many planners in this area or even outside the area use it because it’s very complicated and if you don’t get it right, you can really hurt your clients. It’s something that we have been doing for years however, we know how to do it. What it does is simply give you as much tax-free money as possible; tax-free growth, tax-free income, if something should happen to you and you die, tax-free death benefit and a lot of other options too. Back to risk profiles, if you’re that risky person like Dan, you could have that all in the market. If you’re that conservative person like me, you could have an indexing to, for example, the S&P 500 in your life insurance, but with the floor against loss.
And there are other big benefits to this type of specially designed life insurance. I just got a call the other day from a long-term client saying that they’re moving to Freedom Pointe. They’re not building these assisted living facilities and having them sit empty. If you’ve taken a tour, you know that they’re all pretty much full, and you must get on the wait list. So the question is, if you ever need in-home care, a nursing home, assisted living, Freedom Pointe, or anything like that, how are you going to pay for it? If you have a specially designed life insurance program, it has chronic care benefits that are all tax free. You could take a half a million dollars out of that policy tax-free, put it as a down payment at Freedom Pointe and use the rest of it to pay for your care. And you still get a tax write off.
In summary, having specially designed life insurance is good for your chronic care situation, it’s good for having a Roth on steroids so you can get as much tax-free income as possible, and if something happens to you unexpectedly and you pass away, it’s also a tax-free death benefit.
This is why picking a financial advisor is one of the most important decisions you’ll ever make. You don’t treat it like you would when shopping for a car. These complex techniques are a unique wheelhouse for Jean Dorrell and her team of fiduciaries. Call our office at 352-307-8652, visit our website (www.senfinancial.com/schedule) to book an appointment, or register for an upcoming seminar. One office. In The Villages. For 30 years. We know retirees and their needs, do you know us?
*Investment Advisory Services offered through Bucket List Wealth Management LLC, a Registered Investment Advisor.
