Protection Products

Comparing Life Insurance to a Roth IRA


Protection

You’ve heard the sales pitch before: Life insurance is a Super Roth, a Roth on steroids. But has anyone really analyzed these comparisons and their validity? Let’s take a closer look at why life insurance is often compared to Roth IRAs with additional benefits.

 

Limits

To qualify for a Roth IRA, you have to fall under certain limits established by the IRS. If you’re married filing jointly, your income has to be less than $191,000. If filing single, your income has to be under $120,000. In addition to income limits, Roth IRAs also have annual contribution limits – currently the limit is $5,500, but people age 50 and over can contribute up to $1,000 extra per year to “catch up” before they retire. 

Life insurance, on the other hand, isn’t bound by any IRS income or contribution limits. Instead, it’s bound by insurable interest and medical qualifications. 

 

Access to Cash

In a Roth, you always have access to the basis without penalty. However, if you are looking to access cash in excess of the basis before age 59½, you’ll incur a 10 percent tax penalty. There are exceptions for first-time homebuyers and qualified educational expenses, however. 

With life insurance, you may incur surrender charges in the first 10-20 years, depending on the contract. Outside of surrender charges, there’s no penalty for accessing the cash value in excess of basis in the contract before age 59½. It’s important that early withdrawals are closely monitored, however, as they could affect the performance of the contract and create a tax liability if the policy lapses.

 

Other Comparisons

Life insurance policies are self-completing and provide beneficiaries a tax-free death benefit – which is greater than the account balance – should the client die before retirement. (Please note that life insurance has cost-of-insurance charges to provide this benefit.) With a Roth IRA, the account balance passes to beneficiaries and may be subject to taxes. 

Beyond age 59 ½, both contracts allow the client to access the gain without paying capital gains tax. Neither contract requires a minimum distribution at age 70½ like a traditional IRA.

 

Conclusion

Life insurance and Roth IRAs have several similarities. However, a few differences may allow high-income individuals to take advantage of Roth benefits through the purchase of cash-accumulating life insurance contracts.  

 

Roth IRA Life Insurance

Water Your Plants, and Then Review Your Clients’ Coverage


Protection

It’s that time of year again! Houseplant Appreciation Day (celebrated Jan. 10) is finally upon us. It’s hard to believe it’s already been a year since we last took the time to celebrate the bond between man and shrub.

Houseplants offer many benefits: They filter our air, look great and can even reduce stress. As we all know, constant time, attention and care are all required to successfully tend to our green friends. Many of us are more than up to the task. 

Why then, do we neglect to care for one of our clients’ most important financial instruments: their life insurance?

Most financial professionals agree that a client’s life insurance holding should be reviewed every couple of years, or after any major life event (marriage, birth of a child, new job, retirement, etc.) If your clients own any form of cash value life insurance, reviewing the coverage regularly is even more important. Unfortunately, this rarely happens. 

Maybe it’s lack of insurance knowledge that keeps us from contacting our clients. Maybe we want to avoid the image of the “salesman.” Maybe we don’t even know who to ask for help. Whatever the reason, Ash Brokerage has the solution: our Life Insurance Portfolio Analysis (LIPA) team!

The LIPA team is a dedicated group of people who specialize in the review of in-force life insurance. With a signed authorization from the policy owner or trustee, and a couple other items, they can order information from the issuing insurance company to “stress test” the health and viability of any insurance policy. 

After the in-force policy performance has been reviewed, the team can look at the marketplace today and determine if there are any potential improvements to be made. The life insurance industry is a fluid marketplace; products are constantly changing and evolving, just as your houseplants are constantly growing!

All joking aside, as a financial professional, understanding the need for life insurance review is critical. The consequences of a poorly managed policy can be devastating.  

As you take time to celebrate the indoor flora in your life (or not) on this Houseplant Appreciation Day, at least remember this: You have a dedicated team at Ash Brokerage that is waiting to help take the pain out of life insurance review. Our goal is to be objective, efficient, and make you look like a professional. Call the team today for marketing materials, sample outputs or to simply learn more about the process!

 

LIPA Portfolio Analysis Life Insurance