At American Financial Literacy Institute we’re always looking for ways to better educate our people. In particular, we created a report called the Life Insurance Retirement Plan. In this report we compare some of the differences of using life insurance as a retirement planning alternative unlike a traditional 401k or something of this nature. In particular with Life Insurance, we get some benefits that we don’t get in a traditional 4o1k or IRA. In particular, we can have tax free distributions on the back end, meaning that when the money comes out we don’t pay taxes. Unlike a 401k or IRA, we have to pay taxes on the back end, we don’t get a tax deduction upfront, but we do get the ability to have the money grow tax deferred and then have it come out tax free so it could be a really powerful story. The other thing we talk about is how Life Insurance; the investment component of it can be done in an indexing type concept. What do I mean by indexing? In particular, it’s a strategy that allows you to target the SMP 500 or a multi-asset index (there is many different investment options). As you invest in this, you don’t get 100% of the upside, but what you get is none of the downside. Meaning that if the market dropped five or ten percent, you would get zero. We joke and say “zero is your hero”. But over the last ten or fifteen years, this would’ve been a very powerful way for you to invest, protecting yourself, and actually outperforming a traditional buy and hold type strategy. On the back of this report, we explore specific examples of using a $10,000 contribution to your 401k every year, comparing that to a $10,000 contribution to a Life Insurance plan. While you do get a tax savings upfront with the 401k, because you get a tax deduction, when the money is growing in the 401k, you pay taxes coming out. With the Life Insurance example, you don’t get the tax deduction upfront, but what you do get is the money coming out tax-free! This can be a huge difference in the way of returns. In a traditional 401k, using a 7.5% growth rate (Warren Buffet cited from 1950-2011). That money would’ve grown to $268,000, meaning $10,000 a year for 15 years, $150k worth of contributions, at 7.5% would’ve grown to $268,000. And we show you using that how the money in a traditional 401k would come out. You have to pay taxes on that money so we assume a 25% tax bracket coming out with the 401k, and we notice that over that time of getting income. If we do a 30 year time horizon, you basically are going to pay over $150k in taxes while that money has been coming out of your traditional 401k. With the Life Insurance, again, we don’t get that tax deduction upfront, but we get the tax-free distributions on the back end. What that means is the $150k of taxes that you would’ve paid, you don’t pay that with the Life Insurance. The nice thing too is that as it’s coming out of the Life Insurance, it doesn’t effect your social security taxes. Unfortunately, most people don’t realize that potentially much as 50 to 85% of your social security could be taxed in retirement, depending on how much income they make. With the Life Insurance Retirement Plan, you don’t have that. The other thing is that it doesn’t effect your Medicare B Premiums. The last concept that we talked about with the report is taxes. Where are we currently in taxes? You’re not going to believe this, but we are in the lowest tax environments we’ve been in for the last 70-80 years. Most people feel with a budget out of control and the big deficits that we’re facing that taxes have to go up over the long run, so the argument can be made that deferring today to potentially pay taxes down the road at maybe a higher tax bracket isn’t going to make as much sense as you think it is. So if you think that taxes are going to go up, a Life Insurance Retirement Strategy might make more sense to you. It’s our job to educate you as to what is out there, this might be a piece to a portfolio, there are great reasons to have a 401k like potentially a company match. There’s also great reasons to maybe have some money in a Life Insurance Retirement Strategy.





Heart Attacks


Sometimes referred to as the “silent killer,” heart disease is officially the leading cause of death, claiming over 700,000 people a year.  A single EKG’s and MRI can cost over $5,000, hospital stays can average over $20,000, angiograms can be as much as $30,000, and a heart bypass can cost over $70,000. Drugs can be very expensive, not to mention rehabilitation and ongoing maintenance.  The CDC Foundation estimates that we spend over one billion dollars a day treating heart disease and strokes, with one out of every six healthcare dollars spent on heart care.  The U.S. spends more on healthcare than any other country, estimated by CNBC to total over $3.4 trillion dollars a year with an average of over $10,345 per person.


Over 155 million people are covered under an employer sponsored heath insurance plan.   However, the Kaiser Family Foundation reported that over 27 million Americans don’t have health insurance, with the Hispanic community making up the largest demographic without insurance.  The leading reason that people don’t have health coverage is that it was unaffordable, and with healthcare costs continue to increase at alarming rates, it will only become more prohibitive.


The state of financial preparedness is frightening when you consider the statistics about how
people handle their finances, savings habits, and what we do with our money.

Over 82% of people cite financial stress as the #1 distraction in their lives, but yet 48% don’t
save anything. According to the Social Security Administration, 68% of adult Americans have
NO savings for an emergency. It is also the #1 cause of divorce.

The average credit card debt is over $ 16,000 per household. Student loan debt averages over
$36,000, with 40% of people behind on their payments.

Our National debt is over $19 trillion dollars last year, which is more than our annual GDP, or the
value of all goods and services sold in a year. Estimates are that underfunded liabilities for
Social Security and Medicare could be over $90 trillion dollars. According to the Social Security
Administration, over 34% use social security as their only income, and 31% of people claim to
have NO retirement savings at all! The average retirement savings balance is only $ 104k, or
roughly 2 to 3 years of most traditional income needs.

According to several statistics on Disability, a 35 year old has a 50% chance of a disability
lasting longer than 90 days before age 65, but only 2% of people believe it will happen. 90% of
working people feel that “earning a paycheck, or income” is their most important asset.
However, over 100 million workers have no long-term disability insurance. 90% of disabilities
are caused by illness, not accidents, but 14% of disabilities will last over 5 years, 24% for 3
months, and 38% of people couldn’t pay their bills for 3 months. Some 46% of people have
never discussed disability planning, but consider that the #1 cause of bankruptcy is unplanned
medical bills or illness/disabilities.

50% of people have no budget, but over 80% feel that it would help. Most people don’t realize
the power of saying a little every month, with most experts feeling 10 to 20% annually of your
paycheck a great place to start. Senator Elizabeth Warren has the 50/20/30 plan, 50% for
necessities, 20% for savings, 30% for discretionary spending. Over use the 4% rule as the
withdrawal factor of your money for retirement, such as 4% of $ 500,000= $ 20,000 of annual starts with SAVING!

Part of a Cure – Over 70% of people in the Personal Finance Employee Education Foundation
survey desire basic financial education in the workplace. Over 47% of employees spend more
than 3 hours a week at work thinking or trying to solve their financial problems. According to
the Federal Reserve, this causes businesses about $ 5000 a year in lost revenue, totaling over
$300 billion in lost productivity. The American Medical Association feels stress related diseases
runs into the billions each year.
The Problem…..We Need To Change!

Charitable Gifting Through Life Insurance

Many people don’t realize that using life insurance can make a powerful impact in the planning needs of your favorite charities. The “leverage” that can be used to make gifts allows the amount of the policy’s death benefit to usually far exceed the premiums that were paid into the policy, while still keeping things very flexible. There are many simple ways to use life insurance in charitable gifting:

  1. You can gift a policy’s dividends to a charity, such as a dividend-paying whole life policy
  2. Change your current beneficiary to a charity
  3. Gift a policy that is no longer needed to a charity
  4. A common plan is to buy a new policy with the charity being a full, or partial beneficiary, and making gifts to pay the premiums.
  5. Buy a large life insurance policy to back a future donation, because of the lower costs of the premiums vs. the amount of the death benefit.
  6. Gift a highly appreciated asset to a charity for tax benefits, and purchase a life insurance to replace its value for your heirs.

An example:

Jane is 70, and has a $200,000 C.D. at the bank. She doesn’t need the money, but wants to create a meaningful endowment to her favorite charity. However, she also wants her children to inherit the $200k at her death. Jane purchases a cash value life insurance policy with a

$475,000 death benefit, and names her charity as a beneficiary for a portion of the policy proceeds ($275k), and her children ($200k). Incidentally, if Jane needs the money or changes her mind, she still has access to her cash values in the policy. Also, the policy can be further designed to include a chronic illness benefit (similar to long term care) or critical illness protection (cancer, heart, stroke, Alzheimer’s, etc.)

The above example is just one of many different ways to plan for charitable gifting using life insurance. There is also potential income, estate, gift, and capital gains benefits that can be provided. Life insurance can be a tremendous tool for many charitable gifting programs, and makes a wonderful, powerful impact. When designing a life insurance policy, make sure to use a knowledgeable professional, and consult with your trusted tax advisor for tax benefits.

Pat Moran is an experienced financial professional, and recognized as a leading financial educator for the American Financial Literacy Institute. Pat specializes in many aspects of financial education, and conservative solutions for helping people to invest and protect their money. He can be reached at (602) 571-1035

How to Pay for Long-Term Care

Are you retiring anytime soon? Are you worried that you will have enough money? What happens to your money if you get sick, or need long term care during retirement?

The statistics are from 35% to as much as 70% may need some form of long term care before they pass away, and the costs could run in the tens of thousands of dollars.  Many people don’t want to get long term care insurance because they may not use it, and like a lot of insurance programs, you end up paying a lot of money for something you may never use!  It’s a roll of the dice, but there are alternative ways to get some long term care protection.  In particular, a “hybrid” insurance approach could be a great way to have LTC protection, but still have significant benefits if you don’t need to use.  Best of all, some of these policies can even include coverage for critical illnesses, like cancer, heart attack, or stroke, which can also be financially devastating.   We wanted to share this article that was presented on NBC’s Today show, January 10th.

Read the Today Show Article (includes informative videos):

If you don’t have $250,000 to spare, how to pay for long-term medical bills?

If you want to have a healthy retirement, there’s a big wild card you need to be prepared for: health care expenses. Medical costs, especially unexpected ones, can add up. A 65-year-old couple will need an estimated $260,000 to pay for unreimbursed medical expenses through retirement — and that doesn’t include long-term care, according to Fidelity Investments…  READ MORE >