Shoring up the Retirement Gap with Life Insurance
 
Every one of your clients has suffered financial losses in the most recent Wall Street debacles. The deregulation that allowed the Wall Street moguls to destroy the retirement accounts of your clients makes for an interesting life insurance opportunity for the financial advisor.
 
As you may remember several years ago our industry suffered from issues relating to over- optimistic valuation of assets, the FAS 157 rule, Mark-to-Market and Risk Based Capital requirements were put into effect to make sure Life Insurers  maintain very conservative investment strategies. Most life insurance companies have very limited mortgage exposure and the majority of their holdings represent the highest rated corporate and government bond portfolios.
 
You may have noticed that with a few exceptions, like AIG, most of our companies have weathered this financial storm extremely well. In the case of AIG, its subsidiary,  American General Life, is a jewel because of the strict investment requirements the life insurance industry has required. As this piece is being written several very strong insurers are looking to purchase this gem and when you read this, it may have already taken place.
 
 
So where do we stand and what is our role as financial advisors and life insurance professionals? How do you advise your clients ?
 
As an example, lets assume that you have a client who had $ 200,000 in their 401k or saved for retirement before this debacle. Their assumption was that this would grow to $400,000 in the next ten years using the rule of 72 and assuming 7% interest. But what has happened? Now they only have $100,000 or less and the client's psychology is pushing them toward lower risk investments. Now the client is looking to earn 4% at best annually, in other words they won't reach the goal of $400,000 for twenty years or more!
 
The "buy term and invest the difference" strategy, whether right or wrong is still the mantra of most clients. In other words, their investments were going to replace the need for life insurance as they approached retirement. So there is the new phenomenon, "The Retirement Gap", these are the years from when the client expected to retire, compared to the time horizon where they will actually be able to retire.
 
Your responsibility is to call your clients and discuss where their Retirement Gap is, how much is it and how long will it last. A guaranteed 10 or 20 year term policy can fill this gap for their family or if the gap is infinite, a GUARANTEED UL product would be more appropriate.
 
I hope you get on the phone with your clients and discuss this with them, no one can predict your client's life expectancy and now there is a real urgency to place large amounts of life insurance on your clients to shore up their financial future. Retirement planning and investing are exciting topics to discuss with your clients, and now more than ever it is important for them to make sure that their families are not pushed into financial destruction with the untimely death of the provider while markets are so uncertain.
 
SHAW AMERICAN FINANCIAL CORP has the variety of guaranteed term and UL products that you can view and compare for your clients. Please call us so we can help walk you through the maze of insurance products available for your client's needs. We know we can help you and your clients. After all, this is what we have been doing for over four decades.
 
 
Jon Shaw, CLU, ChFC
President and CEO