How Long Should You Plan to Live to 95?

Most people don’t see the need for life insurance in their later years, let alone the benefit of whole life insurance in their retirement plan. By retirement, you may expect to have your home paid off, and not have the same income needs as before. You may even decide you're not retiring at all if you can help it. https://www.youtube.com/watch?v=1kq9rC5nw6I Even still, there are tremendous advantages to whole life insurance that lasts for your whole life. This includes having insurance beyond what most consider their life insurance needs. For many people, retirement planning with whole life insurance isn’t just about protection - it’s also a way to build reliable retirement savings that complement other income sources. Tune in today for this eye-opening conversation with Dr. Wade Pfau about the three key benefits of retirement planning with whole life insurance. Table of contentsThe Nature of Retirement IncomeThe Benefits of Whole Life Insurance in Your Retirement PlanHow Does the Volatility Buffer Work?Inflation RisksBuilding a Retirement Income PlanThe Reality of Stock Market ReturnsWhole Life Insurance In Your RetirementLinks ReferencedAbout Dr. Wade PfauBook A Strategy Call The Nature of Retirement Income [5:19] “What makes retirement income different is that the nature of risk changes… just in looking at how the investment world approached retirement income, I developed concerns.” Those concerns led to Dr. Pfau looking into assets that are traditionally not considered retirement assets, like life insurance. Life insurance isn't common in retirement plans because many people don't believe they need it anymore. However, life insurance has benefits that many people don’t consider, and aren’t taught to consider.  [5:56] “In the risk management context of retirement… potentially looking at different tools, not just using only an investment portfolio to fund retirement expenses, can help lay that foundation for a better retirement outcome.” When you only have investment assets for retirement, you have a sequence of returns risk. This means that you risk significant losses because you can’t time the market in retirement. After all, you’ve got to take your income to eat and pay bills. Retirement income usually comes from several sources, including social security, pensions, investment withdrawals, and whole life insurance retirement income. Balancing these streams helps reduce risk and creates a more predictable cash flow in retirement. The Benefits of Whole Life Insurance in Your Retirement Plan The value of whole life insurance is that “the cash value is not exposed to the risk of loss,” as Wade says. The cash value is a non-correlated asset and grows no matter what is going on in the stock market.  [7:25] “It can provide a resource to cover spending on a temporary basis during this kind of bad market environment so that you don’t have to sell from the portfolio to fund spending... Well, then that gives the portfolio an opportunity to recover and to make up those losses again before we have to go back to selling from it.” [8:01] “Ultimately the benefits [of whole life insurance] to the portfolio exceed the cost of the insurance to give a better net outcome, especially when we consider the tax advantages and so forth of life insurance.” Some of the key benefits of whole life insurance in your retirement plan include: Guaranteed cash value growth that isn’t tied to market swings Tax-free access to funds through policy loans A death benefit that supports long-term legacy planning Protection against market volatility by acting as a non-correlated asset How Does the Volatility Buffer Work? A "volatility buffer," as Wade Pfau calls it, is an asset that can help your investments during market downturns. The idea is that after the market dips, you can pull income from your volatility buffer to minimize your losses and give the account time to recover.