One of the notable changes in the American economy over the last couple of decades has been the virtual disappearance of the steady 40-year career with one employer. It has been replaced with a culture where workers move from job to job, sometimes combining multiple part-time gigs to stitch together a required income. This new workforce reality is a challenge for financial advisors to navigate because it leaves in its wake a significant amount of “income volatility” that must be managed for clients.
A new report from the Center for Financial Services Innovation (CFSI), a non-profit group that aims to increase the quality of financial products in the marketplace, found that 48% of Americans have expenses that are equal to or greater than their income, causing them a significant amount of financial stress.
This income volatility makes it difficult for pre-retirees to plan and budget, but it also raises stress and anxiety on those clients who have exited the full-time workforce altogether. For seniors, it can mean an exacerbation of physical health issues, as research proves that higher financial stress levels have worrisome health implications. For financial advisors, it creates the dual challenge of providing their clients with sound retirement funding counsel and also helping them to manage their emotional stress.
Unfortunately, many retirement planning experts and industry think tanks tend to focus on mutual funds and other conventional investing products as strategies for dealing with these income volatility challenges – while there is a powerful retirement planning asset often sitting right under their noses.
Life insurance is one of the most poorly understood retirement assets in most seniors’ portfolios. As ThinkAdvisor readers know, life insurance is personal property, so your clients can sell it just like any other property or security they own. The buyer of the policy gives your client a lump-sum cash payment, takes over all future premiums on the policy and then receives the death benefit when your client passes away – a transaction that enables your client to obtain roughly five to seven times the amount of the policy’s cash surrender value, according to the Life Insurance Settlement Association.