There is nothing sexy or romantic about life insurance until you are left a widow or widower and that money is given to you to take care of you. Suddenly, a life insurance contract becomes a very romantic gesture.
A month or so ago a man contacted me from Texas. He had read my book and was deeply curious about my philosophy on life insurance. At first it was something we discussed as a way to help his grandchildren be financially successful or have money to attend college down the road. This was a man that thought hard about leaving a legacy.
As we got to know each other better, it became obvious how much he loves his wife. He kept saying, he wanted to make sure she was taken care of should something happen to him. I asked why we weren't looking at a plan on himself so she would receive money when he passed away? He said at age 65 he didn't know he could buy life insurance anymore. I explained that he would get more bang for his buck with growth doing it over the life time of his grandchildren, but that we could get a nice bang for his buck to take care of his wife and have money in his later years in case he needed it.
Armed with this new idea and information, he asked me to design a plan on himself. One plan with income as an option and the other as if he just left it to grow knowing he would guaranteed leave a lump sum of tax-free money to his wife.
This client is not a wealthy man or even a millionaire, but he's lived within his means and paid off his home so his bills are relatively low. With this in mind, he could take money out of his 401k each year and pay the taxes and have $10,000 he didn't need to live on. This $10,000 a year became his legacy money.
The client liked that his $10,000 guaranteed $128,094 of death benefit if he died after the first year. He said, "as far as I can see, my family will never get less than what I put into the policy and they never have to pay tax on the money. My money is protect all along the way."
You can see after 10 years, we never put another dollar into the plan. It is paid up and guaranteed for the rest of his life. There is a small dip in death benefit since we are not making room for the next $10,000. However, he is still $57,497 ahead of the game and its been built to grow with him.
At age 85 the client asked to see himself taking money out of the plan to live on. I'm showing him taking the same amount of money he placed each year for 10 years. At the end of 10 years he is 95 years old. You can see he still has plenty of money in case he wanted to continue. At this point he has placed $100,000 and he's removed $100,000. But because of the way we purchased this plan, he still has $149,016 if he died tomorrow. So he turned $100,000 into $249,016 and had no taxes all this time because of the protection of a life insurance contract. This left him feeling very good because he could protect his family between now and the next 30 years and pass knowing he left them and his money in a good position.
The client then asked me to show him the same plan but with no money coming out, as he hoped to not need to touch it, but loved that he could if life threw him a curve ball. The illustration below is all the same except no income coming back out to live on.
If the money is left in the policy, it will continue to grow and compound uninterrupted. By age 95 he would leave his family $295,471 tax-free. The client was elated. He had no idea he could take part of his qualified money (old 401k) and turn it into a protected, tax-free legacy plan. This client wanted to guaranteed leave his wife in a good position. This client wanted to be able to access his money in an emergency or if life changed and he needed to take income.
This client also told me that at age 65 he had no time for losses and no time for an investment to not work out. He needed guarantees and peace of mind. The group we went with has been in business for over 150 years. They've been protecting clients money and families through some major events like the Great Depression, World War I and World War II and the Great Recession.
There comes a time when return of your money becomes more important than return on your money. In this case he will get both and have peace of mind that his financial future is bright and protected. The client could now enter his Golden Years feeling like his legacy was in place and his wife would be taken care of.