Transcript

Mike:

Welcome again to Mike on Money. I’m Michael Reese, certified financial planner. Great topic today. We’re going to talk about why is life insurance so hot right now? I mean, it’s like real estate, everybody, the real estate market’s going crazy. It seems like everybody I’m talking to wants to know more about how life insurance might make sense as part of their planning. So we’re going to talk about that today because there’s a lot of good reasons here. You know, it’s a new world. It’s not the world of our grandparents anymore. And before we do, I do this every week. Make sure if you like this video, click the like button, click the share button, click the subscribe button. You don’t want to miss out on any of these episodes. Alrighty. Let’s dive in. Why is life insurance so hot right now? I mean, think about it. I remember when I started in the financial industry 26 years ago, here’s how, here’s how life insurance works.

Mike:

The idea is when you’re young, you buy a bunch of life insurance, because guess what? Like, that’s what I did. Why I had a mortgage. I had small children or young children and man, if I died, well, my wife would be up the Creek without a paddle. So, but a big old life insurance policy tax-free money, you know, that would take care of her so that she’d be protected. The kids would be protected. She could pay off the mortgage, you know, all that good stuff. Right. And then what would happen is as you get older, as I would get older and our little example, as I got older and get closer to retirement, I probably know the house is paid off. The kids are grown and I’ve got enough in savings. Maybe I don’t need insurance anymore. And I can just kind of let it lapse and let it go. That’s the old world way of thinking about life insurance, but just like everything else in the world, things have changed. You know, I remember when we used to call people on like a handset and yet a rotary dial. Remember those days? Yeah. These days we use cell phones, the iPhone. It does everything. Different tool, technology advances, same thing with life insurance. So let’s talk about the three reasons that life insurance is so darn hot right now. Why are people so interested? Okay, here we go. Ready? Number one. Tax-Free oh, there we go again.

Mike:

If you’ve been watching me, what happens every time I use the phrase tax free, I get all excited and geeked. Best two words in all of financial planning. Tax-Free is wondrous, right? So life insurance, number one benefit. Why do people love it? Tax free DB. What does DB stand for? Death benefit. I want you to think about this. Let’s imagine that you are getting ready to retire. You’re getting ready to retire. You’ve worked hard. Your whole life you’ve saved money. Just like you were supposed in your 401k. You’ve built up a million dollars, right? Maybe more, maybe less, but you got million dollars. Well, here’s the deal. Guess what happens when you die? Your spouse inherits that million dollars, but because it’s in a 401k, remember that’s money. That’s never been taxed. There’s a huge tax bill due to surviving spouses. And remember they’re single tax payers now. So guess what? A tax-free death benefit to surviving spouse, especially if you’re leaving that person a large 401k or IRA. That’s awesome for them because they can take that death benefit and use it to pay the tax. Convert that 4 0 1 or that IRA to a Roth IRA who suddenly they they’re tax-free for the rest of their life. Right? Huge, huge benefit to surviving spouses. Okay. How about number two? I know what you’re thinking. You’re thinking. What, what about me? I got to die. That’s great for my spouse. What about me? Well, how about this one? Tax free income. Oh my goodness. Hey,

Mike:

Why do, like Becky and I? My wife and I, we put tons of money in this stuff every year. Why? Because we are creating a big old pot of tax free cash that is incredibly efficient at delivering tax free income in retirement. Look, if you’re in your thirties, forties, fifties, making a pretty good income. This can be, if it’s designed the right way, a wonderful tool to help you deliver enormous amounts, like big, big streams of tax-free retirement income. I’m telling you what, in a world where taxes are likely going up in the future to have some income that’s tax-free in retirement. Hey, that’s a beautiful thing. Beautiful thing. And then what’s number three, Tax free, long term care benefits. You know, what’s going on, doctors, you know the stuff we used to die from, we’re getting through, but you know, we don’t look our, our life. Isn’t the same. On the other side, in a lot of cases, we’re needing more and more people are needing long-term care. The older we live, the more likely it is to need long-term care, but your health insurance doesn’t pay for it. How are you going to pay for it? Well, sweat life insurance contracts. These days, you can use the death benefit to pay for your long-term care. So it could be a death benefit up here, or it could be a long-term care benefit down there. Or you could use some of it for long-term care, the rest for death benefit. In other words, it’s a lot more flexible than it ever used to be three reasons you want life insurance, even in retirement is right there.

Mike:

Boom, boom, by the way, who doesn’t want you to have this life insurance in who is the one there’s one institution that loves it. They love it. When you get rid of your life insurance, when you get closer to retirement, do you know who that is? Yeah. It’s the life insurance industry. They don’t want you to keep this stuff in retirement. You know why? Because if you do, they got to pay the big old death benefit. If you surrender your policy, as you get close to retirement, they don’t have to pay the big death benefit. They just have to pay whatever cash values in there. So the insurance industry would love you not to do this, which by the way, if you’re a bit of a skeptic, like I am that alone is a reason you might want to do it, but let’s be honest, a lot of benefits these days. Really cool structure again, all about design. You gotta make sure you design it the right way, but that’s why people are really interested in life insurance today and why it might be something that’s important to you as well to check out. All right, that’s this week’s show. Remember if you liked it, click the like button subscribe. If you haven’t already. And of course, please feel comfortable sharing this with your friends, relatives, neighbors. And if you have questions, you can always connect with us. All the information is below. Talk to you again soon.