Ernst & Young (EY) has just released new groundbreaking, independent, and unbiased research on financial planning. Their perspective is clear, a financial plan that combines permanent life insurance (PLI), income annuities, and investments are more likely to outperform an investment-only approach over the long term. Also, having permanent life insurance and annuities along with investments gives clients more options to generate income in retirement, maximize their legacies, or strike a balance between the two.
This new research offers a sophisticated and detailed explanation of four reasons why this approach to financial planning can be the most effective:
Better financial outcomes
Based on the scenarios run, the combination of insurance, income annuities, and investments leads to more income in retirement, and more significant legacies to leave your loved ones— both of which lead to the ability to spend more confidently today. The key reason is that permanent life insurance and income annuities outperformed fixed income over the long run.
Permanent life insurance + investments outperform term life + investments
Having permanent life insurance in a portfolio not only offers a death benefit, but the cash value a policy holds grows over time in a way that is safer and separate from the rest of the portfolio, creating more long-term value.
Regardless of risk tolerance, the integration works. Permanent life insurance is not only guaranteed to grow over time, but along with the guaranteed income of an annuity, it offers investors the opportunity to take on more risk in other areas of their portfolio and potentially see higher values.
Save on taxes
Permanent life insurance and income annuities both offer tax-deferred growth. Plus, a PLI death benefit is generally tax-free and its cash value can be accessed tax-free in multiple ways.
Why integrated strategies perform better
According to EY, integrated strategies outperform investment-only strategies in both retirement income and legacy. Here’s an example of how. A strategy for a 35-year-old couple, allocating 30% of annual savings to PLI and that same couple at age 55, allocating 30% of assets to an Income annuity produced 3.5% higher retirement income at age 65 and 16.3% more legacy at age 95 than the investment-only strategy. That’s because PLI and the income annuity tend to
outperform fixed income.
To read the full Ernst & Young report, click here.
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