Your Savings-Conservative Money Fund

{7 minutes to read}  Our company is called SWAN, which stands for Strategic Wealth Advisor Network. The acronym SWAN, however, has another meaning, and that is the concept of Sleep Well At Night, and feeling protected and comfortable about your finances. 

Recently, I had a conversation with some clients about their estate plans, long-term care insurance planning, and life insurance. They were very concerned because their parents had Alzheimer’s, etc., and spent considerable time in assisted living and nursing homes. They were very concerned about the financial impact on their heirs if similar things would happen to them. They’re very good savers and had quite a bit of money and savings set aside. We recommended some life insurance for them that was permanent in nature, meaning it would not expire or terminate, like the majority of insurance many people have known as term life insurance. Analyzing the permanent life insurance: The first thing we pointed out to them was that this life insurance policy would simultaneously protect their family and provide them with a death benefit that would never expire, meaning it would last their entire lifetime.

The policy also allowed that death benefit to be used while they were alive if they could not do two out of six activities of daily living, things such as dressing, transferring, bathing, toileting, and swallowing, or if they had a cognitive impairment such as memory loss, Alzheimer’s, aphasia, or dementia.

The thing that really was the magic that got them to understand why this was something we were recommending, and why they should consider it, was that even though the cost of it was significantly more than a term life insurance policy, what this life insurance enabled them to do was to move some of their savings from their bank account into the life insurance policy which would create all these different benefits. First, you have now, instead of just the emergency money sitting there waiting to be used, that money that would be moved into the policy, which is a permanent policy, meaning that the death benefit is there for the rest of their life, and they get this long-term care benefit. The client was still concerned because this policy was considerably more money than the term policy.

After we went into the proposal in more detail, they realized that the policy was building up a cash surrender value that can be accessed and is instantly available to the policy owner, and that money not only was available to them but was creditor protected (creditor protection rules vary state by state). For example, in New York, where I’m from, there is unlimited creditor protection against someone who’s suing you. They can’t access that money in the policy. 

Also, the cash value, unlike the bank account that they had their savings money or their emergency fund in, generates taxable income, whereas the life insurance policy doesn’t generate taxable income, it grows without taxes. It is also 100% liquid and available, unlike money saved in 401(k)s and IRAs. That money isn’t easily accessible when you need it if you’re under 59 and a half.

Once they understood that their emergency money could also be their life insurance cash values, it became evident to them that this was a great path, and that they were simply moving money from pocket A into pocket B. 

With that understanding, they picked up permanent life insurance. They picked up the long-term care benefits, and the tax-deferred growth. They picked up on the fact that the policy cash was also a liquid place for them to store and grow their savings, and that they would have the ability to take that money out at any time, for any reason, at any age. Whatever the cash surrender value, approximately 95% of that would be available for them. While still allowing the policy to remain in force.

At that point in time, the client started to question. Well, I could use that as my emergency fund, so if there was a roof that needed repairing, or they needed to replace an appliance, they’d be able to use the policy cash value for that. And then I shared with them some of the many stories that many of my clients and others have used policy values for. In my life, I’ve used policy values to help pay for college. 

And then while my kids were in college, I stopped paying the premiums in my policy and when the kids got out of college, I started paying the policy back. So, the emergency fund I could use, and I could then pay back into it, and use it again. I used it to help purchase a vacation home in Arizona and so on. 

So, conservative savings, sleep well at night money, doesn’t have to be in a bank account. It could be an insurance policy that does other things besides having liquidity for an emergency, but also could provide money in the event of other things that could happen — lawsuits, market fluctuation, death, disability, etc. The life insurance policy can provide significant benefits to a family who wants to save money and have an emergency fund. So, when it comes to smart planning, insurance planning could be a great tool to protect you. 

These folks were relatively young, but by doing it when you’re young and healthy, you’re in a better position later on because that emergency fund is growing and compounding for more years. It allows you to use that money to help supplement retirement and social security, allowing you to protect your assets from the cost of healthcare if you need to put in a long-term care claim, and protecting your family for the rest of your life against death or premature death. 

If this is something that resonates with you, and you’d like to learn more about it, please contact us, and we’ll be happy to show you how a plan like this can help force you to save money while protecting yourself and giving you that safe money emergency fund that you need in a smart and efficient way.

 Thank you and have a great day. 

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS. Strategic Wealth Advisors and G&G Planning Concepts, Inc. are not affiliated with APFS and APA. 

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.

This material is for informational purposes only. Neither APFS nor its Representatives provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions. American Portfolios Financial Services, Inc.(APFS) and American Portfolios Advisors, Inc.(APA) are not affiliated with any other named business entities mentioned.