Life stage: Preretirement
At around 45 to 60 years old, it may be appropriate to think about leveraging life insurance to help with retirement planning. “Folks in that age range may have maxed out what they can contribute to a 401(k) on an annual basis,” Landry says. “They may not have options from an income perspective to contribute to an IRA either.”
Individuals in this situation who have a need for life insurance may want to consider insurance strategies such as an indexed universal life product or a variable universal life product, designed to accumulate what is called high early cash value.
Landry says this approach is not necessarily geared toward funding a particular death benefit, but rather toward accumulating cash inside of the policy.
“The life insurance provides for your protection needs, but then the supplemental income and that high early cash value component deliver a lot of value so as you get into retirement, you can seek to maximize things like Social Security and IRA withdrawals — and use that life insurance cash value as a bridge strategy.”
Note: Investments in variable universal life are subject to market risk, including loss of principal. “High early cash value” will fluctuate in value based on market performance. Cash value is accessed through policy loans and withdrawals, which reduce death benefit.
Life stage: Extended care planning
The third life stage involves insurance strategies based around extended care needs, an area where carriers have gotten creative with solutions, says Landry. Options include traditional long-term care, a hybrid policy that combines life insurance and long-term care insurance, and a life insurance product with a long-term care rider.
Landry says that while some people are hesitant to use long-term care insurance strategies, if positioned properly they can be an effective estate-planning tool.
“The knock on long-term care coverage is, ‘If I never need it then I don’t really get any value from it.’ But in many cases, you can marry it with a life insurance product solution. You have a life insurance product, and if you need long-term care, you can draw upon that policy,” Landry says. “It reduces the face amount of the policy, but you are able to cover your costs related to long-term care services, and if you never need long-term care, well, you have a life insurance policy that you can leverage for your estate planning purposes.”
Life stage: Legacy planning
The last life stage is legacy planning: using life insurance strategies to create leverage — in a tax-efficient manner — so you can leave a gift to your recipient of choice, such as a family member or charitable organization. These solutions tend to be individually tailored.
“We have insurance specialists who work hand-in-glove with estate planning attorneys to put together life insurance solutions that can help meet legacy planning needs,” Landry says.
At every stage, Landry says, he and his team focus not on products, but on solutions and insurance strategies. “It’s not about, ‘You have to get an insurance product,’ ” Landry says. “It’s, ‘Let’s talk about the insurance that you have. Is it still meeting your needs as you move through life’s stages?’”