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Retirement Life Insurance

Book Description

Do your clients have any idea of what they can/should spend in retirement? Do they know what they need to do to optimize their retirement spending? How can you protect a spouse from the drop in social security if a client dies early? Why is it likely that buying insurance or buying a fixed annuity can dramatically increase the level of your client’s spending—even if your customer is already retired? What if you could show your client exactly what the impact would be and at what level they would need to buy to achieve a certain level of spending? How can buying a fixed annuity be a hedge against term life expiration and what level is required? When should your client start taking social security? What can your client spend now and how much can that improve if they purchase insurance or an annuity from you?

All these questions and more are answered in this book and in the free software that accompanies this book. The software, though more complex than most end users would care to learn, offers you the opportunity to load in customer financial data and give them results that will calculate various options. The amazing and counter-intuitive part is that it is highly likely that most individuals can see their monthly spending capability go up dramatically by buying insurance and/or buying a fixed annuity and the software enables you to zero in on the desired level.

Even though life insurance is an old, established financial product, and annuities are even older, there is one enormous market that has been overlooked: the market for additional retirement funds for a surviving spouse and replacement of Social Security payments that are lost after the death of a spouse. This book explains how to address this market, and includes instructions and a license for software that illustrates how insurance and annuities can increase sustainable spending in retirement.

Most people have no idea how much they can really spend in retirement. Many are living frugal lives spending their social security while "saving for a rainy day". They buy life insurance in batches of tens thousands of dollars because it sounds good or what they think they can afford. Almost no one would believe that buying "expensive" life insurance after age 60 actually can free them to spend MUCH more on a monthly basis. Furthermore, no one is looking at an optimum return on the investment based on a certain level of potential spending. Until now. This book, and the accompanying software enable you, the life agent, to input the customer data and come up with a plan for your customer and provide proof that the plan will work for them.

The book explains what goes into making these calculations, why they work the way they do and gives various case studies that quite often show that buying term insurance or buying an annuity after retirement can be great investments for them. We think your customers will be convinced. There are detailed instructions as to use of the software that accompanies the book with built in case studies that you can use. But even more importantly, you can input a customer’s data and provide them with options and actually show them the benefits or give them the solutions that they would otherwise not know exist. These solutions will be invaluable to your business and offer you a distinct advantage over competition that are not selling in this manner.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Acknowledgments
  5. Contents
  6. Preface
  7. Chapter 1: The Retirement Crisis in Brief
    1. A Tale of Two Widows
  8. Chapter 2: A New Use for Life Insurance
    1. Retirement Income Security and Life Insurance
    2. Prerequisites for Calculating Sustainable After-Tax Spending
    3. Calculating Sustainable After-Tax Spending
  9. Chapter 3: A Visit with the Financial Planner
    1. Back to Our Two Sisters…
      1. The Comparison between Results with and without Insurance
      2. How is the Amount of Life Insurance Calculated?
      3. Including Existing Life Insurance
      4. Optimizing the Timing of Social Security
      5. Entering Client Personal Data
      6. Entering Client Asset Data
      7. Entering Client Income Information
      8. Full Retirement Age and the Primary Insurance Amount
      9. Estimating Sustainable Spending before Adding Insurance
      10. When to Take Social Security
      11. Annuities or Pensions
      12. Expected Additional Expenses
      13. Sustainable Spending Including Additional Expenses
      14. Indexing for Inflation
      15. Existing Life Insurance
      16. Assumptions on Inflation and Return on Investments
      17. The Social Security Optimization after Setting the Assumptions
      18. How Much Life Insurance Would Optimize Sustainable Spending?
    2. What is Sustainable Spending?
      1. Life Insurance is a Perfect Match for the Risk of Dying Early in Retirement
      2. How Spending Money on Life Insurance Premiums Can Increase Sustainable Spending
    3. Another Look at the Comparative Results with and without Life Insurance
      1. Illustrating Comparative Results with the “Manual Death Years” Feature
      2. How the Insurance Payout Fits In
      3. How Sustainable Spending Can be Affected by the Year of Death of One of the Clients
      4. Changing Assumptions May have Nonintuitive Effects
  10. Chapter 4: Another Visit with the Financial Planner
    1. Year Numbers
    2. Cash
    3. Nominal vs. Real Return
    4. The Need for an Annual Review
    5. Traditional Retirement Account Assets
    6. Withdrawal Strategies to Optimize Taxes
    7. Four Different Withdrawal Strategies
    8. Other Ways to Improve Sustainable Spending
    9. Significant Improvements in Sustainable Spending by Adding Insurance
    10. Roth Assets
    11. Taxable Assets
    12. Taxable Assets Basis
    13. Estimating Taxes vs. Precise Tax Calculations
  11. Chapter 5: The Withdrawal Source Section of the Spreadsheet
    1. Cash Delta
    2. Why it’s Not Important to Calculate Future Results Precisely
    3. Traditional Retirement Account Delta
    4. Roth Delta
    5. Sale Basis
    6. Long Term Capital Gains
    7. Taxable Bought
    8. Qualified Dividends
    9. Social Security
    10. Taxable Income
    11. Nontaxable Income
  12. Chapter 6: Cash, Taxes, and Insurance Premiums The Next Day…
    1. Cash before Taxes and Insurance
    2. Estimated Federal Income Tax
    3. Insurance Premiums
    4. Cash after Taxes and Insurance
  13. Chapter 7: Calculating Sustainable Retirement Spending
    1. A Very Simplified Example of the Sustainable Income Calculation
      1. A Well-Known Solution to the Problem of Level Payments When there is Interest being Paid
    2. Chapter 8: Adding an Annuity
    3. Chapter 9: Can an Annuity Improve Sustainable Retirement Spending?
      1. Where to Find Annuity Payment Information
      2. Why Knowing the Exact Starting Dates of an Annuity is Important
      3. Deferred Annuities Can Also Improve Sustainable Retirement Spending
      4. What Happens after the Death of One or Both Annuitants?
      5. Adjusting Annuity Payments to CPI
      6. Why we Might Want to Compare Last Year’s Projections with this Year
      7. Worst Case Longevity Results
      8. Median Longevity Results
      9. The Worst Case Years of Death
      10. Selecting the Starting Date for Life Insurance
  14. Appendix A: Reference Manual for the Gui Interface of the Rhino Retirement Analyzer V1.0, Basic Mode
    1. The Opening Screen
    2. The Personal Data Tab
      1. DOB
      2. Sex
      3. Rating
      4. Max Lifespan
      5. Median Lifespan
      6. Entering Some Reasonable Data for the Personal Tab
    3. The Assets Tab
      1. Cash
      2. TRA
      3. RRA
      4. Taxable
      5. Tax Basis
      6. Entering Some Reasonable Data for the Assets Tab
    4. The Income Tab
    5. Salary
      1. Retirement Date
      2. QD
      3. SS Start Date
      4. SS FRA Date
      5. Estimate PIA
      6. PIA
      7. Estimated SS Benefit
      8. Entering Some Reasonable Data for the Income Tab
    6. The Annuities or Pensions Tab
      1. Lives Covered
      2. Adjusted to CPI
      3. Return of Premium
      4. Annuity Cost
      5. Annuity Basis
      6. Starting Date
      7. Monthly Payment
      8. Estimated Taxable Amount
      9. Entering Some Reasonable Data for the Annuities or Pensions Tab
    7. The Expected Additional Expenses Tab
      1. Expected Additional Expenses Spreadsheet
      2. Index to Inflation?
      3. Entering Some Data for the Expected Additional Expenses Tab
    8. The Existing Life Insurance Tab
      1. Starting Date
      2. Term
      3. Face Amount
      4. Yearly Premium
      5. Estimate Premium
      6. Entering Some Reasonable Data for the Existing Life Insurance Tab
    9. The Assumptions Tab
      1. Inflation
      2. Portfolio Assets Nominal Return
      3. Cash Nominal Return
      4. Entering Some Reasonable Data for the Assumptions Tab
    10. The Suggested Insurance Tab
    11. The Suggested Annuities Tab
      1. Starting Date
      2. Values for 100K Basis
      3. Monthly Payment
      4. Estimated Taxable Amount
      5. Adjusted to CPI
      6. Return of Premium
    12. Other Features of the GUI Main Screen
    13. Saving, Reloading, and Clearing Data
  15. Appendix B: Reference Manual for the GUI for the Rhino Retirement Analyzer v1.0, Expert Mode
    1. The Expert Mode Checkbox
      1. Tax Verification
      2. Manual Yearly Spending
      3. Manual Death Years
  16. Appendix C: Tutorial for the Scripting Language and Command-Line Interface of the Rhino Retirement Analyzer v1.0
    1. Why does the Rhino Retirement Analyzer Need a Command-Line Interface and a Scripting Language?
    2. The rra File Type: Initializing the Program with Previously Saved Data
      1. A Command-Line Example
      2. A Sample rra Script File
      3. A Sample File Header
      4. The Variable Assignment Portion of the Sample Script File
      5. The Function Execution Portion of the Sample rra File
      6. Other Options for Command-Line Use
      7. The rrr File Type: Recording a Run of the Program for Later Replaying
      8. Uses for the .rrr File Type
  17. Appendix D: The Market for Retirement Spending Optimization
    1. Does the Public Know that Retirement Spending Optimization is a Problem?
  18. Appendix E: The Genesis of the Rhino Retirement Analyzer (and this Book)
    1. A General Description of the Current Version of the Program
  19. Appendix F: What is Included, What is Excluded, and Known Limitations of the Program
    1. Factors that are Included in the Rhino Retirement Analyzer Calculations
      1. Taxes
      2. Social Security
      3. Insurance Analysis
      4. Annuities and Pensions
      5. Assumptions
      6. Lifespan Estimates
    2. Factors that are Not Included in the Rhino Retirement Analyzer Calculations
      1. Taxes
      2. Social Security
      3. Assumptions
      4. Pensions and Annuities
    3. Known Limitations of the Program
    4. Disclaimer and Caveats
  20. Index