Income Focus: In Apple Pie Order

byRob Wick

Income planning is at the top of the list for most if not all pre- and post-retirees. For a number of years, the chief goal with income planning process was to identify an income shortfall or gap and then discuss an income-driven solution to fill or plug the shortfall or gap. While there is certainly an importance to work with clients to identify an income shortfall or gap, the plan cannot be to simply find a solution that bridges that gap. There are entirely too many variables that are not being addressed, leaving the client negatively exposed.

Earlier this month, I discussed rising inflation, posing the following questions:

  • Can the dollar hold its weight in the future?
  • Where are taxes headed, certainly not down?
  • If we know inflation is on the rise and taxes are inevitably going up, how do you solve for an income gap that will be larger in the future than it is today?
  • The answer: comprehensive income/bucket planning.

Comprehensive income planning requires a financial professional to take all of the above into account. Using an income rider on an annuity, while providing a lifetime of income you can never out live can supplement pensions and Social Security, but it doesn't keep pace with inflation or rising taxes. On the other hand, index universal life (IUL) can provide a tax-favorable supplemental income. Unlike an annuity, IUL does not guarantee a lifetime of income, however, it provides a means to keep pace with inflation and taxes.

A financial professional that provides a truly comprehensive approach considers both solutions with regards to a client's income stream. The combination of lifetime income or a “mailbox paycheck” from an annuity used in conjunction with supplemental income from cash value life insurance provides the optimal blend for an income stream that cannot be outlived, income that is tax favorable and the ability for the income to keep pace with inflation.

The real question is how do you position all of the assets together to create a comprehensive picture in light of inflation, account for market corrections and even assist with rising taxes on taxable assets? Join us in July at our Advanced Market Planning meeting as we have a number of key note speakers who will be addressing these topics.

*In apple pie order is a cowboy phrase referring to being in top shape.