In the first part of this article, we discussed several elements that often comprise the shape and tone of a retirement picture, and stressed the importance and absolute need to put some serious thought into how important each element is to you if you want to achieve a picture-perfect retirement.

With the guidance of the Insured Retirement Institute’s (IRI) “Retirement Expectations Checklist,” we have already explored several needs you must weigh as you think about and ultimately set into motion a solid and realistic plan. But we also acknowledged that determining how much you would need to save — and later, to earn — to reach your retirement number, how old you wanted to be when you left the workforce, how you planned to treat investments and guarantees, and if annuities would  play a role in you plan were just the beginning of several considerations you must ponder. And just for perspective, we noted how the baby boomer generation weighed in on the importance of these topics. In keeping with that tradition, we’ll now list a few more issues for you to place in your retirement picture — you just need to determine how prominently featured they will be.

Your Debt Situation: The past several years have not been economically kind, and many Americans have been forced to incur more debt than they would like. In fact, for a whopping 48 percent of boomers, even the essentials, things such as food, medication, and gas, often had to go on the old credit card. Do you have any debt resultant from the recent economic strain or any other reason? No one wants to retire in debt, so start paying down what you can, and start now. You may find it helpful to ask an advisor to help develop a budget (that includes retirement savings) to which you could adhere until your debt is eliminated.

Leaving a Legacy: Have you given any thought to whether you’d like to bequeath any funds to your loved ones after you pass away? How important is that, and importantly, how much money would you like to leave behind? Many baby boomers (62 percent) feel that leaving an inheritance is either “very” or “somewhat important.” If you are of a similar mind, you would do well to mention that goal to your retirement planner.

Considering Long Term Care: To avoid burning through your savings or burdening one of your children should you become ill or somehow impaired, long term care insurance is one type of coverage worth exploring. The earlier you plan the better, since 47 percent of boomers worry they won’t have enough funds to cover the expenses associated with long term care. Talk to a professional agent or advisor to determine if long term care insurance will complement your plan.

To Work or Not to Work: When you reach retirement age, do you intend to leave the workforce for good and good riddance, or are you someone who would prefer to work part time for a while to keep yourself occupied? Neither situation is better than the other, especially if money is no object. But what if you must work during retirement? A full 57 percent of the baby boomer cohort anticipate that due either out to personal choice or need, they’ll need to work at least part time beyond age 65.

Preparing for retirement takes just that — preparation. Preparation, prioritization, and not a little bit of planning. Spend some time thinking about these plan elements, and then review your list with a financial professional to ensure your retirement picture is shaping up nicely and make adjustments where necessary.

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Both 401k plans and IRAs have contribution limits which set a cap on how much you can save using these retirement plans. If you have the income to save large amounts, or if you’re behind in your retirement planning and are trying to catch up, these limits can be a burden.

If you’re using a 401k plan to save for retirement and you’re under 50, your yearly contribution for 2012 is capped at $17,000. If you’re over the age of 50, your contribution is limited to $22,500. For savers using IRA accounts to save for retirement, your contribution limit is based on your overall earned income. For most people, the contribution limit is $5,000. Savers over the age of 50 can contribute $6,000.

While 401ks and IRAs allow savers to deduct their contribution from their federal income tax liability, in the long-run this may not be the wisest course as you will have to pay taxes on the eventual withdrawals you make once you retire. Often, people who have carefully saved for retirement for decades using IRAs or 401ks find that the savings they realized from taking tax deductions while they contributed to their retirement plans are wiped away within a few years once they retire and their withdrawals become taxable.

For workers who are late getting into the game of saving for retirement, the limits on contributions to IRAs and 401ks can pose a challenge to ensuring that they have sufficient retirement savings to maintain their lifestyles. There are alternatives that can be used to help supplement these plans, however.
If you’re saving for retirement, one way you can supplement your existing 401k plan or IRA is by purchasing life insurance products as retirement savings alternatives. There are a number of benefits to adding a life insurance retirement option to your existing retirement savings plans.
For starters, contributions are unlimited, and you can save as much as you like. Also, insurance savings plans have far more liberal early withdrawal rules than IRAs or 401k plan, making it easy for you to withdraw money from your plan or borrow against it to handle unexpected expenses during your working years.

Another key benefit of life insurance retirement vehicles is that they can be set up in a way that reduces your tax liability when you retire and begin making withdrawals from the plan. Properly used, the withdrawals can be tax free and some companies even guarantee the income for life.
Also, should you happen to die before you reach retirement age, the life insurance portion of the policy will ensure that your family is taken care of, and they’ll also have the retirement savings for themselves.

Any investor will tell you that diversification is a key to success. This same concept holds true for retirement investing. Why put all your eggs in just one basket? By diversifying your retirement savings vehicles, you can maximize the amount you have set aside for your golden years and have a good financial firewall against calamities during your working years.

To take advantage of cutting edge insurance products like equity-indexed policies, contact a financial advisor with experience in life insurance products and retirement planning. These experts can help you define savings goals, set monthly contributions and work to shelter your savings from tax liabilities.

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While many people will consider converting a 401k or IRA plan to a Roth IRA, this financial move can have some deleterious financial consequences. Looking at other investment options as a substitute or a supplement to 401k or Roth IRA plans may be a smart idea for many people saving for retirement.

In an uncertain world, having enough money to fund a comfortable retirement is an increasingly worrying issue for many Americans, even professionals who earn substantial salaries. Finding the most tax-efficient and profitable method of saving for retirement is vital to saving for your retirement years and providing help to your children as they go to college, begin families or start a business.

Lots of people use 401ks and IRAs to save for retirement and later convert them to Roth IRAs as circumstances may make it an advantageous or necessary move. Typically, people convert to Roth IRAs to allow their retirement savings to grow tax free instead of on a tax deferred basis. If you still have a substantial number of working years left before you retire, making a conversion may be the right move as it gives your money time to grow. However, if you’re on the verge of retirement and need to start tapping the Roth for income, a conversion may be a bad move when you consider the taxes involved.

The key downside of converting a 401k or IRA to a Roth IRA is that the amount you convert will be taxable at the time of conversion. This can push you up to an uncomfortably high tax rate when you convert, and take a chunk out of your savings or other income.

If you’re looking to avoid some of the tax hassles that come with traditional IRA and 401k plans, check out the recent innovations in life insurance that allow policy holders to save for retirement. A key benefit of these plans is a high ceiling on how much you can contribute.

Also, these life insurance retirement savings plans are designed to grow on a tax-deferred basis, and with careful planning you may be able to reap the values during retirement on a tax-free basis.

Equity indexed policies are a hot product in the insurance industry. They combine a guarantee of principal with a potential for returns tied to a market index like the S&P or DOW. The downside of this investment strategy is that you’re not able to deduct contributions to this plan from your current taxes.

There are a number of other benefits that make these contracts more flexible than 401Ks or IRAs. Unlike other retirement savings plans, an equity indexed policy will allow you to withdraw money from your account or borrow against it during the accumulation years. Also, if you become disabled, your premium payments for the insurance policy may be waived.

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Life Insurance, like medicine and technology, has evolved to the extent that it hardly resembles what it looked like just a decade ago. The basics have remained, but what has dramatically changed is the way in which cash values earn return. The latest generation  policies combine the security of guaranteed cash values with interest linked to a stock market index. Let’s revisit the changes over the past decade.

The history of the change goes back into the mid 1990’s in the annuity industry. Prior to this time, investors interested in tax deferred annuities had two choices available. Fixed annuities offered a guaranteed principal with interest rates determined by the insurance companies. Variable annuities used market based sub accounts, similar to mutual funds which offered higher growth potential but no guarantees to the principal. The first Equity Indexed annuities (EIA) offered principal guarantees like fixed annuities while the return was tied to a market index like the S&P 500 or the Dow. The expectation was that over time, the indexed linked returns would out perform fixed rate annuities with no risk to losing principal.

The history of cash value life insurance policies has been quite similar to that of annuities. The original form of whole life insurance offered fixed premiums and guaranteed cash values which grew over time. In the 1980’s variable universal life policies were introduced that tied the growth of the cash values to mutual fund based sub accounts. Returns were potentially higher but without any guarantee of principal. Market downturns caused investors to be wary of losing the cash values of life insurance as this could put the death benefit at risk.

Like the evolving of the EIA, the Equity Indexed Universal Life (EIUL) offers unique advantages to the policyholder. Premiums are flexible which allow investors to increase deposits into the cash value side without increasing death benefits. Sophisticated market indexes credit higher returns than similar equity indexed annuities. Principal guarantees offer protection against market losses. Truly, this “state of the art” innovation has made life insurance the investment of choice for many accumulators.

Find all of this a bit confusing? That’s where an experienced professional can help you sort through all the complexity and guide you. Contact us today with your questions.

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