Retirement Planing

Planning for life beyond working years can be a daunting task. The majority of Americans either don’t have anything saved for that period of their lives, or don’t have nearly enough. Even for those that have “saved” enough in traditional retirement accounts (401K, IRA’s, 403B’s, etc..), there is frequently a looming sense of uncertainty surrounding the amount needed to live comfortably while simultaneously ensuring they don’t outlive their capital. 

The traditional tax advantaged retirement savings vehicles are, in fact, not savings accounts. They are investment accounts generally utilizing a mix of stock and bond funds. The expected results of any retirement plan using only these vehicles is predicated on past performance to predict an unknown future outcome. With 100% downside risk, and unlimited upside potential, these accounts do not fit the definition of “saving”. They are a gamble that past performance IS an indicator of future results. This isn’t to say that these investments are bad, but to rely ONLY on non-guaranteed asset classes opens one up a host of known risks that are nearly impossible to avoid. One of the most damaging is sequence-of-returns risks that can quickly and systematically dismantle even the best designed financial plan.

To illustrate: consider the below two hypothetical clients. Both Amy and George start their retirement with 1 million dollars at 65 years old. The below returns mimic the actual returns of the S&P 500 from years 2000-2015. After 15 years, and drawing 4% annually (adjusted for 2.5% inflation), George is left with only $148,000.


Age Return Annual Withdrawal Year Ending Value
65 -10.14% $40,000 $862,656
66 -13.04% $41,000 $714,512
67 -23.37% $42,025 $515,327
68 26.38% $43,075 $596,832
69 8.99% $44,152 $602,366
70 3% $45,256 $573,823
71 13.62% $46,387 $599,273
72 3.53% $47,547 $571,202
73 -38.49% $48,736 $321,369
74 23.45% $49,954 $355,061
75 12.78% $51,202 $320,137
76 0% $52,482 $267,655
77 13.41% $53,795 $242,538
78 29.60% $55,139 $242,870
79 11.39% $56,518 $207,577
80 -.73% $57,931 $148,554
S&P returns from 2000-2015
Now let’s take Amy. She retires with the same amount of money and withdraws the exact same amount as George each year, but the order of returns is flipped. While the total average rate of return is exactly the same as with George, the end result is not.


Age Return Annual Withdrawal Year Ending Value
65 -.73% $40,000 $952,992
66 11.39% $41,000 $1,015,868
67 29.60% $42,025 $1,262,100
68 13.41% $43,075 $1382.497
69 0% $44,152 $1,338,345
70 12.78% $45,256 $1,458,345
71 23.45% $46,387 $1,743,063
72 -38.49% $47,547 $1,042,912
73 3.53% $48,736 $1,029,270
74 13.62% $49,954 $1,112,699
75 3% $51,202 $1,093,342
76 8.99% $52,482 $1,134,433
77 26.38% $53,795 $1,365,710
78 -23.37% $55,139 $1,004,290
79 -13.04% $56,518 $824,183
80 -10.14% $57,931 $688,554
S&P returns from 2015-2000

This example isn’t meant to highlight that utilizing investments for retirement planning is necessarily bad. It is also clear that some timeframes would yield excellent results, just as others would yield even worse results than those shown for George. Of course, a mix of stocks and bonds would have likely yielded much different results for both. However, even the price action and yield of bonds can be erratic and unpredictable. These examples are simply meant to illustrate that a large factor in the success of one’s traditional retirement plan is not within their control. If market returns happen to be lower in the early years of passive income, the individual drawing on their capital is significantly more likely to run out of money. For those that don’t want to risk living off of less, going back to work, or relying on others to supplement their income, a whole life policy is an excellent way to diversify & solidify a retirement plan.

Whole life insurance can either be an excellent supplement, or main source of retirement income. By contractual design, the accumulated capital in a whole life policy is always growing and is backed by the general ledger of the insurance company. Without delving into the incredible tax advantages these policies offer, we can instead focus on how they can provide a foundation of stability to help retirees supplement their income, and weather the ups and downs of the stock market. Below is another illustration with George, but instead of continuing to draw on his capital in down market years, he takes an equivalent policy loan from his whole life policy.


Age Return Annual Withdrawal Year Ending Value
65 -10.14% $40,000 $862,656
66 -13.04%   $750,166
67 -23.37%   $574,852
68 26.38%   $726,498
69 8.99% $44,152 $743,689
70 3% $45,256 $719,385
71 13.62% $46,387 $764,661
72 3.53% $47,547 $742,428
73 -38.49% $48,736 $426,690
74 23.45%   $526,749
75 12.78% $51,202 $536,322
76 0% $52,482 $483,840
77 13.41% $53,795 $487,714
78 29.60% $55,139 $560,617
79 11.39% $56,518 $561,516
80 -.73% $57,931 $499,909
S&P returns from 2000-2015

As you can see, George has nearly 3 times as much capital remaining as he does compared to when he continued to draw from his market-based accounts in down years.

Many of our clients choose to completely forego the uncertainty of their traditional retirement accounts and rely solely on their whole life policies for an ever-growing, guaranteed, and tax-free source of income later in life. Taking the exact same starting pool of capital, the owner of a whole life policy can typically draw quite a bit more money in their golden years than they would have otherwise from traditional retirement accounts.

Most Americans saving for retirement give up a percentage of their income each paycheck that they cannot easily access until age 59.5 (as of 2023). Premature withdrawals are subject to penalties, taxes, and a severing of the compounding action. Perhaps the greatest benefit to building a warehouse of wealth to deploy in retirement years is that it can be used now, without penalty, and without interrupting the compounding process!

If you would like to see what this would look like in your life or would like to discuss any of the myriad of other benefits of incorporating the Infinite Banking Concept into your retirement plan, please schedule a free, no obligation call.

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The Infinite Banking Concept® (IBC) is about creating your own personalized banking system. The ideal vehicle is high cash value, dividend paying whole life insurance.