Benefits of Integrating Insurance Products into a Retirement Plan
Ernst and Young has just released new groundbreaking,
independent, and unbiased research paper on financial
planning. Their perspective is clear—a financial
plan that combines permanent life insurance (PLI),
income annuities, and investments is more likely to
outperform an investment-only approach over the
long term. Also, having permanent life insurance and
annuities along with investments gives clients more
options to generate income in retirement, maximize
their legacies, or strike a balance between the two.
"Our analysis shows that integrating insurance products into a financial plan provides value to retirement investors.”
1. Better Financial Outcomes
Based on the scenarios run, the combination of insurance, income annuities, and investments leads to more income in retirement, and larger legacies to leave your loved ones— both of which lead to the ability to spend more confidently today. The key reason is because permanent life insurance and income annuities both outperformed fixed income over the long run.
2. PLI + investments outperform term life + investments
Having permanent life insurance in a portfolio not only offers a death benefit, but the cash value a policy holds grows over time in a way that is safer and separate from the rest of the portfolio, creating more long-term value.
3. Flexibility
Regardless of risk tolerance, integration works. Permanent life insurance is not only guaranteed to grow over time, but along with the guaranteed income of an annuity, it offers investors the opportunity to take on more risk in other areas of their portfolio and potentially see higher values.
4. Save on taxes
Permanent life insurance and income annuities both offer tax deferred growth. Plus, a PLI death benefit is generally tax-free
and its cash value can be accessed tax-free through a policy loan.
Why integrated strategies perform better
According to EY, integrated strategies outperform investment only strategies in both retirement income and legacy. Here’s an example of how. A strategy for a 35-year-old couple, allocating 30% of annual saving to PLI and that same couple at age 55, allocating 30% of assets to an Income annuity produced 3.5% higher retirement income at age 65 and 16.3% more legacy at age 95 than the investment-only strategy. That’s because PLI and the income annuity tend to outperform fixed income.