Gone are the days when companies incentivized employees with a healthy pension for retirement. Now, more than ever, are Americans having to take retirement into their own hands. And apparently 36 percent of adults are not saving for retirement at all (bankrate.com).
There are a few reasons why individuals today don’t save for retirement. Bankrate, in their survey, attributed the lack of retirement savings to people living paycheck to paycheck, procrastination, and retirement plans (like pensions) not being offered anymore by employers.
Depending on what stage of life you’re in, retirement is either a frantic priority, or another opportunity to procrastinate savings – either way, retirement will happen for everyone, and it’s best to start saving, and it’s even better to start saving early.
The following case study illustrates how saving earlier in life for retirement, rather than later, can be the difference between tens of thousands of dollars.
Case Study
Two physicians, who are equal partners in a medical practice; both are 45 years old and both plan to retire at age 65. Their financial advisor suggests that they increase the amount of money they are saving each month if they want to be able to maintain their lifestyle during retirement.
Both agree and agree to begin saving more, but each takes a different approach. Dr. Smith begins saving $275 a month immediately, and does so for a 10-year period. Dr. Jones, on the other hand, waits 10 years before starting to save, at which time he, too, saves $275 a month for 10 years; each earn a flat 8 percent interest on their savings.
Because Whole Life Insurance is not a qualified government plan, there are no age restrictions for when you can receive distributions, there are no fees or penalties, and Whole Life has many tax advantages.
Twenty years later, both doctors are 65 and have both put a total of $33,000 away. Dr. Jones, the procrastinator, has earned $14,804 in interest for a total of $47,805 in savings. Dr. Smith, the early starter, has earned over $70,000 in interest for a total of 103,208 – more than twice what Dr. Jones has accumulated with the same initial investment.
| After 10 Years | After 20 Years | Total Contributions | |
| Dr. Smith | $47,805.00 | $103,208.00 | $33,000.00 |
| Dr. Jones | $0.00 | $47,805.00 | $33,000.00 |
Compounding Interest
Those who start saving for retirement early in life have the advantage of receiving more retirement income through compounding interest. But what savings vehicles are best suited for an ample retirement?
Whole Life Insurance
Using Whole Life Insurance for a retirement income is not only smart, it’s efficient. Whole Life Insurance has a built-in cash value that can be distributed during retirement.
Because Whole Life Insurance is not a qualified government plan, there are no age restrictions for when you can receive distributions, there are no fees or penalties, and Whole Life has many tax advantages.
In addition, Whole Life earns a steady rate of return and a policy owner typically receives annual dividends (though not guaranteed).
For more information on how Whole Life Insurance can benefit your retirement, visit Infinite 101.
Read: Planning for a Successful Retirement
Watch: Understanding the Basics of Infinite Banking
Listen: How to Maximize Policy Utilization
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