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" ... Another key difference from VAs is that, related to their potential to protect principal, fixed index annuities may also be emphasized as an accumulation tool in the preretirement transition years to help lock-in a wealth accumulation target at the retirement date with a high probability. The FIA can be treated as an asset class alongside stocks and bonds, but with the unique property that it protects from downside losses. After accounting for its tax deferral, the question becomes whether it provides enough upside exposure to compete with other fixed-income investment opportunities on a risk-adjusted basis. For these accumulation uses, the optional lifetime income benefit may not be emphasized. ... "
" ... Finally, cash value life insurance also provides a valuable death benefit. If we assume that a pre-retiree needs life insurance and is considering between term and permanent life insurance, the net returns on a bond portfolio would also need to be reduced to account for the cost of term premiums as a percentage of the whole life premiums. Bond investments could only be made with remaining funds after paying for the term premiums covering the preretirement life insurance need. ... "
" ... Note that if we add the cash value in Scenario 2 to the 401(k) assets, overall wealth is greater because the whole life policy supports lower life insurance costs in the preretirement years, and because taxes will not be paid on the cash value. This outcome alludes to the efficiencies of cash value as a fixed-income investment when life insurance is otherwise needed for the financial plan. ... "
" ... There are plenty of shortcuts here, like using 80% of your preretirement income or basing it on your current net pay, among others. But shortcuts won’t work when it comes to early retirement. You’ll need hard numbers. After all, early retirement may mean planning for a 40- or 50-year retirement, rather than the standard 20 or 25. ... "
" ... These contribution limits are inflation-adjusted such that real savings are kept the same, but the nominal amounts increase. Because life insurance premiums are fixed without inflation adjustments, the percentage of the savings directed to insurance decreases over time in real terms. Jerry expects to be in a combined 25 percent marginal tax bracket (22 percent for federal taxes and 3 percent for state taxes) in both his preretirement and postretirement years. ... "