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Investing For Your Retirement: How About Life Insurance?

By Thomas Lloyd

Recent stock market volatility has caused a collective feeling of nausea for most Americans this past month who have seen their investments suffer considerable drops in value over concerns of another recession and debt issue in Europe. The Standard and Poors 500 stock index has dropped 17 percent of its value since late July and stocks overall finished last week with a 4 percent decline.[1] The Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options and offten referred to as the fear index or the fear gauge, soared 50% to 48 on August 8th, the highest level since March 2009.[2] Investors are clearly concerned about a recovery in the near term and stock portfolios have reflected that fear.

What should an investor do to protect against such swings in the market? In a simple word – diversify their investments. Not just within the stock market, but into other non-corellated assets for growth. Certain commodities, such as gold, have seen record highs due in large part to this recent period. Bonds, such as U.S. Treasuries have also seen a large influx in the recent past weeks. The obvious downside, long-term at least, to these areas of investment are they usually under perform once the market begins its upswing and numbers improve. One underutilized but effective asset to consider for guaranteed long term growth appreciation and security from market swings is whole life insurance.

What is Whole Life Insurance?

Whole life insurance is an insurance policy with most importantly a guaranteed death benefit, guaranteed premium and guaranteed cash value. The cash values are developed from the guaranteed cash values plus any non-guaranteed dividends, which are declared annually by the company’s board of directors. The issuing insurance company will generally guarantee cash value increases for the life of the contract and premiums (payments by the policyholder) are usually required throughout the life of the policy.

Whole Life Insurance Living Benefits

  • Cash Value earnings tax deferred
  • Not correlated to Stock Market Results. Can serve as a hedge to diversify against market downturns
  • Mutual Life Insurance Companies can provide a dividend to their policyholders, although this is never guaranteed
  • Provides leverage to fund estate taxes for high net-worth individuals looking to minimize taxes for family heirs
  • Cash Value can be accessed income tax-free through withdrawals and loans provided the policy stays in force* to help minimize the potential cost of higher tax rates on retirement distributions.

Whole Life Insurance policies can provide a strong asset for long term growth for a person’s financial portfolio. Coupled with an effective balance in equities, it can help keep a person’s long term investment portfolio stable from large market fluctuations as well as tax exposure protection. Be mindful though that annual premiums are mandatory to ensure the policy remains active so the use of a whole life policy should be purchased with the understanding that contributions need to be made for at least 10-20 years for the policy to be effective. Look for a policy from a mutual life insurance company since most provide a company dividend to add value to the policy’s growth.

Talk with a life insurance specialist to help design a specific policy for you since there are a variety of different whole life options available based on certain financial goals.


Thomas Lloyd  is a life and disability insurance specialist with the Financial Balance Group in Rockville, MD. He works primarily with physicians and dentists to secure disability insurance quotes and whole life insurance quotes online.


* Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above what is paid into the policy may cause ordinary income taxes to be paid on the gain portion of the policy. If the policy lapses, any withdrawals or loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are distributed like withdrawals. All withdrawals are distributed as gain first and subject to ordinary income taxes. If the insured is under 59 ½ the gain portion of the withdrawals is subject to a 10% tax penalty.


[1] New York Times – August 22 2011 – on Wall Street a big split on outlook.

[2] Bloomberg.com – August 22 2011 – Stock Volatility in U.S., Europe Falls as Markets rebound on stimulus talk

One comment

  1. Hi Thomas,

    While your article is nice and clear. Life insurance, whether it’s term, whole life, has more to it.

    Finding an advisor that understand your needs and objectives is very important.

    Just sayin’…


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