7 Sources of Retirement Funding Your Clients Haven't Thought About

Every insurance prospect or client believes that their financial situation is unique, and, to some extent, that’s true. It still makes good sense, however, to partner with your prospects and clients to examine what techniques others have used to find the funds that are necessary for them to purchase products and fund services that help them achieve their immediate and future goals.

Your task is to drive prospects and clients to save more money through the tax-advantaged life insurance and annuity products you offer. Following are seven approaches you may want to discuss with your prospects and clients to help them uncover the money they didn’t even know they had.

1. Redo the budget. Look for excessive expenses in any area. For example, do your clients really need a $4 latte every single day, or could they simply opt for a $1 cup of coffee elsewhere? Changing just one small habit like this could free up $60 to $90 a month. In most households, there are several spending patterns that can easily be readjusted. The effect: This technique forces clients to pay themselves first. Then, the money that may have previously been wasted can be allocated for retirement savings.
2. Consolidate. With your client, take a look at their overall credit card debt and explore options for consolidating this debt, possibly at a lower interest rate. Effect: This may lower monthly payments, freeing up funds to be invested in retirement accounts/products.
3. Refinance. Clients may be able to refinance their home mortgages at a lower rate. The subsequent proceeds can then be used to meet a variety of needs, such as eliminating credit card debt, paying off car loans, and implementing any needed home improvements. Effect: To their advantage, this step may re-establish what has become a diminished income tax deduction for mortgage interest if they’ve held the mortgage for a long time. It could also help lower their overall monthly payments, uncovering more “found” money for investments.
4. Increase pre-tax allocation to a 401(k) plan. If applicable, this can maximize any company matching the client may benefit from. Effect: This money never gets rolled into the client’s budget, therefore maximizing the “free” money from the employer, which should be looked at as a return. For example, a 3 percent employer match of a 6 percent employee contribution is a 50 percent return – and that’s before any interest earnings. Make certain your clients understand this. As an added benefit, additional contributions can increase the total amount that’s available to earn interest.
5. Reallocate under-performing, currently taxed financial vehicles. These can include certificates of deposit, mutual funds, or savings accounts, and the reallocated funds can then be placed into a tax-deferred vehicle such as an annuity. Effect: The resulting tax-deferral may enhance (and will shelter) the current, non-guaranteed earnings and the ultimate growth. The move may also build in several ways for your clients to create a lifetime income stream that was previously unavailable in the other financial vehicles.
6. Reallocate taxable premiums on group life insurance. They can do this on policies with death benefits of more than $50,000, transferring their premium payments to an individually owned cash value life insurance policy. By doing so, they may realize several tax advantages, features, and the benefits of additional income replacement protection or, in the long term, potential retirement income. Effect: Clients would then have control of a portable life insurance policy that will remain in force beyond retirement and not be dependent upon a specific employer.
7. Commit to remaining on current (adjusted) budget. This budget would ideally stay in effect for at least 12 months. Effect: Any upcoming raises and bonus go toward retirement accumulation, preferably in life insurance or an annuity by electronic funds transfer (EFT), allowing it to become a comfortable savings amount.

In fact, No. 7 becomes the easiest way for people to save. Here’s a great idea: Suggest that once every 10 years they “forego” one year’s raise (and/or bonus) and sequester it into out-of-sight, out-of-mind savings (life insurance or annuities). If every American did that one time while in their 20s, then again in their 30s, their 40s, their 50s and finally in their 60s, they would end up saving — without missing the money — a sizeable percentage of their income. And, they could retire with quite a large nest-egg.