KENNEWICK, WA - 12/09/2016 (PRESS RELEASE JET)
Saving for retirement looks a lot different than it did 30 years ago. Whereas a retirement salary in the form of a pension was once all but guaranteed and it was the worker’s employer who managed retirement savings, Americans are now responsible for saving for their own retirements and many are coming up short. A recent University of Chicago report notes that a whopping 93 percent of workers aged 25-30 say they will not be eligible for pensions upon retirement, and 40% of these report having no money saved toward funding their post-work lives (Portland Press Herald, October 14, 2016). Couple this with the uncertain future of the Social Security program and it becomes more and more evident that working people should be considering as many alternative savings mechanisms as possible.
“There are many different vehicles available for saving,” says Tom Doncaster, principle of Doncaster Insurance & Financial Services, Inc. in Kennewick, Washington. “The key is using tools that will allow the most efficient use of money without creating a taxable event every time funds are withdrawn.”
A permanent life insurance policy is one tool that fits this bill. While lower premiums lead many people to choose term life insurance, this insurance is only good for a limited period and is solely for paying benefits upon the policy holder’s death. As well, the premiums often increase over the life of the policy. Permanent insurance, on the other hand, builds cash value that can be used while the policy holder is still living and, best of all, withdrawals may be virtually tax free and premiums tend to remain steady throughout the life of the policy.
Doncaster, who recently spoke at the Business Experts Forum at Harvard Business School, mainly serves clients of the baby boomer generation who are now retiring in record numbers, but stresses that it’s never too early to get started down the road to retirement savings. He encourages the use of life insurance which he calls the “cornerstone of any financial plan.” Starting early with these plans is important because it can take between 10 and 20 years to see the most growth in the spendable cash value of the policy.
“Most people don’t realize that once they begin drawing on their retirement assets—which they’ve already paid taxes on—they can be re-taxed as much as 50-80%!” Doncaster warns. “There are only three vehicles that allow people to avoid this steep tax: Roth IRAs, reverse mortgages, and life insurance.” While most working Americans are at least familiar with the first two of these tools, many are woefully unaware of the potential of their life insurance savings and it is, therefore, an asset that is largely overlooked.
Life insurance can work as a savings vehicle for anyone, but it may be especially helpful for small business owners who often do not have as easy access to 401(k) and other savings accounts as those working for an employer. While company employees are often offered retirement accounts as an incentive to hiring, entrepreneurs can often overlook this important detail and may suffer the most for it in the long run due to insufficient retirement funds. “This is not a job, it’s a mission to help people avoid financial disaster,” says Doncaster, who is known for his combination of care and candor, and who is approaching 30 years in the business. “Winston Churchill said, ‘It’s not enough to do our best, sometimes we have to do what’s required.’ In this business, integrity is everything. This isn’t just money, these are people’s lives and everyone can have the resources to live to the fullest with the right strategies.”
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