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How it Works - Year One
When you apply you make 4 decisions.
Define the amount of annual income that wish to receive at your selected retirement age.
Define the number of years that premiums will be paid into the life insurance policy.
Define an assumed baseline interest rate that the policy will be credited until retirement.
Define the number of yerars you wish to receive income once you reach retirement.
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AN EXAMPLE: Jill, a 35-yearold women wishes to receive an annual income beginning at age 65 in the amount of $75,000 per year. Her four decisons might look like this:
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$75,000 Target Income
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29 Years (Age 35 thru 64)
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6%
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35 Years (Age 65 thru 100)
$600/mo.
From age 35 thru 64
$75,000/yr.
From age 65 thru 100
Hypothetical example for illustrative purposes only.
What Happens Next?
EXAMPLE: CONTINUED: We cannot know in advance how a stock index will perform. What we can safely say is that the performance from year to year will differ from the 6% baseline assumed interest rate. Assume that in year two the policy earned less than the assumed rate. Let's say 5% was credited. The Defined Benefit Life policy management system will send an annual report informing the policy owner of two options:
1. Raise the premium to the amount required to keep the policy of track for the $100,000 income, or, 2. Keep the premium unchanged and be on track for a slightly lower income.
Jill's Option One
Adjust Premium Required to Keep On Track
$621/mo.
From age 35 thru 64
$75,000/yr.
From age 65 thru 100
Jill's Option Two
Premium Unchanged, Now On Track for Smaller Income
$600/mo.
From age 35 thru 64
$74,120/yr.
From age 65 thru 100
Our example assumes that Jill decided to increase the premium to $421/month to stay on-track for $75,000.
Jill's Option One
Lower Premium to Remain On Track
$586/mo.
From age 35 thru 64
$75,000/yr.
From age 65 thru 100
Jill's Option Two
Premium Unchanged, Now On Track for Higher Income
$621/mo.
From age 35 thru 64
$76,070/yr.
From age 65 thru 100
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"Defined Benefit Life provided Jill a tax-advantaged solution to substantially strengthen her retirement security. Including, giving Jill a tax-free income of $75,000 annually."
The above example is for illustrative and education purposes only. It does not represent any particular life insurance policy.
Take Jeanne's advice. Request a free proposal. Just give Jeanne a "click."
Watch Jeanne, Matt's Ai Assistant, Describe the Powerful Advantages of Defined Benefit Life."
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The Defined Benefit Life is a strategy that combines an Indexed Universal Life policy with a unique policy management system to create a personal, defined benefit solution for strengthening retirement security.
"Why life insurance?" A couple of reasons. First, life insurance provides a Death Benefit that protects beneficiaries. Second, the economics of life insurance- tax-deferred growth and tax-free access to cash via policy loans- are distinctly advantaged and valuable benefits that can be leveraged to create an income at retirement which is income tax-free.
Why is Defined Benefit Life different than purchasing an ordinary cash value life insurance policy?
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What makes Defined Benefit Life different (and exceptionally valuable) is the linking of the life insurance policy to an administrative service that manages the policy toward the objective of providing your desired income at retirement. While Defined Benefit Life is not a defined benefit pension, its administrative service mimics the economic calculations used in defined benefit pension plans. This transforms a life insurance policy into a unique retirement security vehicle.
With Defined Benefit Life, the policyowner identifies a targeted annual income to begin at a selected age. Each year, the premium required to fund the annual income is calculated and communicated to the policyowner. Small adjustments keep you on track for the desired income.
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What Type of Life Policy?
About the Multiple Advantages of Indexed Universal Life
Because of its inherent premium flexibility and options for crediting interest, Defined Benefit Life utilizes a type of life insurance policy called Indexed Universal Life (IUL).
IUL offers the potential for interest crediting linked to one or more stock indexes. Depending upon the specific life insurance policy, available indices may include the S&P 500, NASDFAQ 100, or Russell 2000. Some insurers offer proprietary indices. In many cases, policy owners may choose to have more than one index.
The Potential for Growth.
And Protection Against Loss.
IUL offers the potential for interest growth linked to a stock index. That said, IUL is not an investment, and it should not be compared to investments. Rather, the life insurance policy is a tax-advantaged vehicle for saving.
. Many IUL policies have a "current" or non-guaranteed participation rate. In this hypothetical example, the index grows by 6%. But when applying the 200% participation rate, the interest credited to the policy is 12%. Some IUL policies "cap" the level of interest that can be credited in any year.
In this example, the IUL policy has the same 200% participation rate. However, for the year in question the index lost 15%. But because the IUL policy provided a "floor" of 0%, the policy owner is insulated against the 15% index loss. Instead, the policy would receive no interest credit for that year. This example illustrates a critical advantage of IUL: The potential for growth without the risk of loss.
About IUL Fees
All life insurance policies have costs and fees built in. Licensed insurance agents are required to provide you detailed information on these. Ask questions. When you are comfortable with the policy recommended to you, that is the time to apply.
IUL policies have "participation rates," the percentage of index growth that is credited to the policy.
IUL policies have "participation rates," the percentage of index growth that is credited to the policy. For example, a 100% participation rate would mean that the policy would be credited with 100% of any index gain. At the time a policy is issued, the participation rate will be the "current" participation rate then applicable. The current participation rate is not guaranteed. Why? A main reason is that the participation rate is sensitive to interest rates. The insurance company cannot know in advance the level of future interest rates. Therefore, the policy will guarantee a baseline participation rate. Similarly, the policy will stipulate a minimum interest rate. As the years pass, and as interest rates move up and down, the insurance company will tend to change the participation rate in accordance with interest rate movements. Licensed agents must provide an illustration that shows the minimum guaranteed results of an IUL policy.
This chart from the Federal Reserve shows how interest rate can vary dramatically over time.
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You are always in control with multiple options, and always empowered with the information you need to make a good choice.
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