In retirement planning, strategies are as varied as the fairytales we grew up with. But what if there was a tailored, precise strategy that fits your financial needs just like Cinderella’s slipper fits her foot? Introducing the Cinderella Slipper Plan—a retirement strategy that pairs a guaranteed income annuity with a life insurance policy to ensure retirees get the happy ending they’ve always dreamed of.
Why Consider The Cinderella Slipper Plan?
The Cinderella Slipper Plan could be the ideal approach for older individuals with liquid assets, especially those keen on reducing estate taxes. Let’s investigate how this strategy works and why it could be a game-changer.
The Nitty-Gritty of The Cinderella Slipper Plan
Imagine a retiree, 79 years of age, who has a significant sum in liquid assets and is currently drawing a yearly cash flow of $30,000 from $1 million of these assets. Post-taxes, she’s left with $20,000 annually. While it’s a decent sum, it’s not the pretty golden retirement many envision.
Enter the Cinderella Slipper Plan.
By repositioning that $1 million into a Single Premium Immediate Annuity (SPIA), our retiree now receives approximately $9,400 monthly, totaling $112,800 annually. It’s a remarkable improvement and ensures a comfortable living.
However, there is a catch. Upon the retiree’s demise, this cash flow ceases, and the remaining sum of the $1 million nest egg belongs to the annuity company. In other words, her heirs inherit zero from this significant investment.
But here’s where the Cinderella Slipper Plan proves its worth.
The retiree uses the annuity’s cash flow to purchase a $1 million Indexed Universal Life (IUL) insurance policy. In our revised scenario, the monthly premium for this policy is around $5,300, or $63,600 annually.
So, the math comes down to this: the retiree enjoys an annual cash flow of $112,800 from the SPIA and invests $63,600 into the IUL policy. This results in a net positive yearly cash flow of $49,200.
What makes this approach even more appealing is the accumulating cash value of the IUL policy. By age 89, the retiree will have access to $300,000 in accumulated cash value. This can be strategically used to pay the policy’s monthly premiums, further enhancing financial flexibility in the latter retirement years.
Caveats to Keep in Mind
While the Cinderella Slipper Plan offers many retirees a unique financial solution, it might not be a universal fit. The strategy can be ineffective if a retiree doesn’t qualify for life insurance or has specific health concerns. Every plan should be customized to an individual’s unique needs and situations.
Simplifying the Approach
With older clientele, simplicity is vital. Financial jargon can be confusing. Thus, visual aids like diagrams can assist in conceptualizing the strategy before diving deep into numbers.
Furthermore, as this plan often requires approvals from accountants, attorneys, or family members, presenting numbers in a clear “before” and “after” scenario is vital. Transparency, especially in showcasing potential estate tax implications, can aid in smooth decision-making.
In Conclusion
The Cinderella Slipper Plan is a potentially transformative strategy for retirees. It’s one of the few plans where purchasing extensive policies could result in a more significant cash flow post-purchase than before.
As with any financial strategy, consultation with a trusted financial strategist is essential to ensure that the plan aligns with your retirement goals and financial situation. After all, everyone deserves a fairy tale ending, especially in retirement.
