How to be the 4% in the 100 Person Story Thanks to Life Insurance
How can life insurance help me be prepared to retire? Like many people, you may dream about traveling the world or living someplace warm in a nice home in retirement. Unfortunately, the facts are that this is not the case for most people. When I first started in the life insurance industry, I was told a distressing story illustrating the point. The 100 Person Story is a tale that over time has mutated and been altered but its message is still one that resonates. Whether a tactic to indoctrinate new agents or a marketing tool to sell more life insurance or both, the story whose roots come from a study from the Department of Health and Human Services is still true and that should give you pause.
A quick internet search on the story will yield you a variety of results. I will use the version of the story that states, based on the study cited above, for every 100 people in the workforce, retiring at age 65;
· 16 would be dead and not have reached age 65
· 65 make less than $20,000 a year and rely upon social security to live
· 15 make over $20,000 but less than $50,000 a year
· 4 make over $50,000 a year (that’s just 4%!)
The story is supposed to be unsettling. For practical purposes, it gives people like me the chance to paint a picture which states that you need to get your financial life in order and plan ahead. As the cliché goes, “People don’t plan to fail, they fail to plan”.
Most people see this as a push for cash value life insurance as part of a retirement income plan. With most plans that I’ve seen showing around a projected 4% internal rate of return on the cash value at current dividend levels, permanent life insurance with cash value growth at that rate is a safe, conservative investment with a rate of return significantly higher than a bank. Of course dividends are not guaranteed, but should the policy perform reasonably close to if not better than they are now, coming out of a horrible recession, you could schedule withdrawals from the policy tax free and make it act like a pension. The earlier you start a policy, the lower the premium and the longer you give the policy to grow. Much like putting money away into your 401k, this requires some fiscal discipline and staying true to your priorities.
Cash value life insurance aside; ever know anyone that passed away before age 65? If you knew them well, how were their families finances afterwards? Did those people have life insurance? Given the fact that only around 1% of term policies pay out a claim, I’m going to say that they didn’t have life insurance.
If you’re young, get term life insurance. Life happens and you never know when it’s going to happen to you. If you have debt, a family or have people financially dependent upon you, as a matter of fiscal responsibility, you should have life insurance. Peace of mind is worth sacrificing a night at the movies a month for you and your honey. Depending on your health you might still be able to get Netflix (life insurance rates depend, in part, to your health).
The story is what it is. Depending on your situation and personal experience it could mean nothing to you or it could be the catalyst needed for introspection. Financially speaking, are you and/or your family where you want to or need to be? If not, perhaps it’s time you speak to someone like me. Which one of the 100 do you want to be? I'm thinking in the 4%.
About the author: Anthony Veloso has been in the life insurance business for over 2 years. He enjoys coaching football, playing outside with his dog, and taking day trips with his wife and newly born daughter. Anthony is a strong supporter of Orphanages and Battered Woman’s shelters. He would love to put his experience to work for your family to ensure that you have the right life insurance policy. You can contact Anthony at 1-800-654-1953 or AVeloso@Pivot.com.