Leslie Hammock discussing How Life Insurance Fits into Retirement
Listen to the interview on the Business Innovators Radio Network: https://businessinnovatorsradio.com/interview-with-leslie-hammock-founder-of-retire-by-design-discussing-how-life-insurance-fits-into-retirement/
In this episode of Influential Entrepreneurs, host Mike Saunders welcomes back Leslie Hammock, founder of Retire By Design, to discuss the crucial role of life insurance in retirement planning. Leslie shares insights from his 40 years of experience, emphasizing that life insurance is not merely an expense but a vital component of a well-structured retirement plan. He recounts his personal experience with his family’s life insurance, highlighting how it served as a financial safety net for his mother after the unexpected loss of his father. The conversation delves into the two main categories of life insurance—temporary (or term) and permanent—exploring how each type can fit into a comprehensive retirement strategy. Tune in to gain a deeper understanding of how proper life insurance can enhance financial security during retirement.
The Role of Life Insurance in Retirement Planning
Life insurance is often viewed merely as a safety net for beneficiaries after one’s death. However, as discussed in the podcast episode featuring Leslie Hammock, founder of Retire by Design, life insurance can play a multifaceted role in retirement planning, offering both death benefits and living benefits that can significantly enhance financial confidence during retirement.
Understanding Life Insurance Types
Leslie categorizes life insurance into two main types: term insurance and permanent insurance.
Term Insurance
- Temporary Coverage: Term insurance is designed to provide coverage for a specific period, typically ranging from 10 to 30 years. It is often recommended for younger individuals who are raising children and managing significant debt.
- Cost-Effective: Term insurance generally has lower premiums compared to permanent insurance, making it an attractive option for those in their younger years.
Permanent Insurance
- Lifetime Coverage: Permanent insurance, which includes whole life, universal life, and indexed universal life, provides coverage for the insured’s entire life, as long as premiums are paid.
- Cash Value Accumulation: Permanent policies build cash value over time, which can be accessed during the policyholder’s lifetime. This feature can be particularly beneficial for retirement planning, as it allows for tax-free income through policy loans.
The Importance of Timing
Leslie emphasizes the importance of timing when it comes to purchasing life insurance. By the mid-50s, individuals should consider transitioning from term to permanent insurance. This is crucial because:
- Health Changes: As people age, health issues may arise, making it more difficult or expensive to obtain new coverage.
- Cost Considerations: Purchasing permanent insurance in your 40s is significantly cheaper than waiting until retirement age.
Living Benefits of Permanent Insurance
One of the most compelling aspects of modern life insurance policies is the inclusion of living benefits. These benefits can provide financial support while the policyholder is still alive, addressing various needs such as:
- Chronic Illness: Coverage for long-term care, whether at home or in a facility.
- Terminal Illness: Access to the death benefit if diagnosed with a terminal illness.
- Critical Illness: Funds available for significant health events like cancer or heart attacks.
These living benefits can alleviate the financial burden of healthcare costs, allowing individuals to maintain their quality of life without depleting their retirement savings.
Tax Diversification and Retirement Income
Leslie discusses how permanent life insurance can complement other retirement vehicles, such as IRAs, by providing tax-free income. Key points include:
- Tax-Free Loans: Loans taken against the cash value of a life insurance policy are not subject to income tax, making them an attractive option for accessing funds without incurring tax liabilities.
- Flexible Financial Strategy: Permanent life insurance can serve as a financial resource for various needs, such as funding children’s education or covering unexpected expenses, without the need to withdraw from retirement accounts during unfavorable market conditions.
Holistic Financial Planning
Leslie highlights the importance of a holistic approach to financial planning. Rather than piecemeal planning, where different financial aspects are managed in isolation, a comprehensive strategy ensures that all elements—insurance, investments, and estate planning—work together effectively. This integrated approach can lead to better outcomes and a more confident financial future.
Leslie shared: “Financial planning isn’t a one-time event. It shouldn’t be piecemeal. Retirement and Estate Planning should go hand in hand. I am committed to walking beside my clients every step of the way”
