Working 'Til You Die Is a Lousy Financial Plan



Dan Kadlec

Jan 12, 2017


Wall Street and the financial press have been harping for decades on the retirement savings crisis. But it seems that for some young people the wrong message is getting through.

A large group of millennials have decided to punt on retirement altogether: One in eight plan to work until they die, according to Manpower Group. Some young workers simply feel they have no choice: According to Merrill Edge, one in five say they would need to win the lottery to retire and, partly because they have little faith in Social Security, 83% plan to work in at least some of their retirement years.

Working past a traditional retirement age in your mid-60s may indeed be a financial imperative. Just don’t assume that means you can go light on saving in a 401(k) or other accounts. That is a misguided and dangerous conclusion.

The reality is that many people are forced to leave the workforce before they would like. Three in 10 retirees quit work sooner than expected, Transamerica found. A quarter of those were forced to quit for health reasons and 11% quit to deal with family responsibilities. Two-thirds quit for employment-related reasons, including job elimination. Half of Americans wind up retiring between ages 61 and 65.

So even if you plan or want to work into your 80s, say, you may not be able. If that’s the case, you will look back to your 20s and 30s and wish you had been saving more diligently.

That’s not to say that millennials aren’t saving for retirement, even while many of them are saddled with college loans. The average millennial began saving at age 22, remarkably young, and is more likely than a Gen Xer or boomer to consider a company 401(k) plan his or her most valuable benefit.

Yet even those who are saving are not saving nearly enough. The average young worker is saving just 6% of pay, according to a report from BlackRock. That same report concludes that they need to save 25% of pay in what is likely to be a slow economy for decades to come, if they want to retire at 65. Other reports reach only slightly more optimistic conclusions.

Part of the problem is that millennials generally distrust the financial community and take their cues from poor role models. Generally lacking financial know-how, a third of millennials rely most on financial advice from friends and family, according to Fisher Investments. In a Fisher survey, four of five millennials flunked a 401(k)-plan quiz.

Overwhelmed by the oppressive 25%-of-income saving target that BlackRock recommends? Then aim at least for 15%, which will give you a solid cushion and may prove enough to quit at 70 or 72.

Besides, even if you are fortunate enough to be able to work as long as you want, you may find that 40 years from now you will have changed your mind and wouldn’t mind calling it quits—or at least downshifting to a less demanding job.

You may even want to try starting your own company. You can’t know how you will feel four decades from now. By saving along the way you will build insurance against involuntary job loss and create flexibility to change your mind.

Life Insurance Before Age 40

Millennials have good reasons to obtain coverage now.

Provided by Jason Bramley

Do you plan to buy life insurance before you turn 40? Maybe you should. You may save money in the long run by doing so.

At first thought, the idea of purchasing a life insurance policy in your thirties may seem silly. After all, young adults are now marrying and starting families later in life than past generations did, and you and your peers are likely in excellent health with a good chance of living past 80.

In fact, LIMRA – a life insurance research and advocacy group – recently surveyed millennials and found that 30% thought saving for a vacation mattered more than buying life insurance coverage. The perception seems to be that insurance is something to purchase when you start a family or when you hit your forties or fifties.1

Getting a policy before you marry or start a family may be a great idea. The reasons for doing so might be compelling.

Your premiums will be lower. The older you become, the more expensive life insurance becomes. Data compiled last summer by Life Happens, a non-profit life insurance education effort, confirms this.

Life Happens asked several prominent U.S. insurers to supply their preferred premium rates for healthy non-smokers aged 25, 35, 45, and 55 buying a $250,000 whole life policy (the kind designed to build cash value with time). The average preferred premium rates for 25-, 35-, and 45-year-olds fitting this description were:

25-year-old male: annual premium of $1,987

35-year-old male: annual premium of $2,964

45-year-old male: annual premium of $4,747

25-year-old female: annual premium of $1,745

35-year-old female: annual premium of $2,531

45-year-old female: annual premium of $3,947

The numbers starkly express the truth – whole life insurance premiums more than double between age 25 and age 45.2

Premiums on term life policies are even lower. Term life insurance is essentially coverage that you “rent” for 10, 20, or 30 years – it cannot build any cash value, but in some cases, a term policy can be adapted or exchanged for a whole life policy when the term of coverage ends.

If you are young, term coverage is remarkably cheap. NerdWallet recently researched term life premiums for healthy 30-year-olds. It found the following sample rates for 20- and 30-year term policies valued at $250,000:

30-year-old male: annual premium of $156 for a 20-year term policy, $240 for a 30-year term policy

30-year-old female: annual premium of $141 for a 20-year term policy, $206 for a 30-year term policy

The downside of term coverage is that you are “renting” the insurance. Just as you cannot build home equity by renting a house, you cannot build cash value by “renting” a policy.3

A whole life policy may become quite valuable. As Life Happens notes, the average such policy bought at 25, 35, or 45 may have a guaranteed cash value of anywhere from $100,000-200,000 when the policyholder turns 65, assuming the policy is kept in force and no loans are taken from it. Universal life policies permit tax-deferred growth of the cash value.1,2

Make no mistake, a whole life policy is a lifelong commitment. It must be funded every year or it will lapse. That should not scare you away from the value and utility of these policies – the cash inside the policy can often be borrowed or withdrawn. Sometimes families use cash value to fund college educations or help with medical expenses or retirement. Such withdrawals can lessen the death benefit of the policy, but what is left is often adequate. Cash withdrawals from a whole life policy are usually exempt from taxes, just like the death benefit.1   

Maybe this is the time to put time on your side. Age-wise, life insurance will never be cheaper than it is for you today. Getting coverage now – even if you are single – may be a money-smart move as well as a great life decision.  

Jason Bramley may be reached at 309-585-4117 or jbramley@mbi.ageny.


This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.





1 - [10/17/16]

2 - [1/26/17]

3 - [1/26/17]


Catholic Spirit Radio

Well Kurt and I aired our first show yesterday on Catholic Spirit Radio 89.5 in Bloomington.  It was called 'Catholic and Protestant Conversations'.  I think that for our first show it went really well.  We have gotten great feedback and really appreciate the support.  Here is the link to the podcast.  Please feel free to suggest ideas for the show or let us know if you would like to come on!

Go Fund Me :-(

I continue to see more and more "Go Fund Me" pages and the like in the past year.  I would like to provide an educated take, from the perspective of an insurance agent.  I first want to make very clear, I in no way disregard these sites as trivial or lacking in social value.  I love the idea that someone who is a starving artist, struggling musician, or the like; can find a place to ask others to help them on their path.  However, I have begun to see "Go Fund Me" as a fail safe for those who didn't take the time to plan or prepare for their future.  They didn't stop to think about protecting themselves or their loved ones.  I know I go to work every day with a passion of providing assistance to clients so that they can prepare and protect.  For instance, this week I wrote a term policy for a 30 year old male with 4 kids.  For less than $100 a month he was able to protect his family with 3 million dollars in life insurance!  I don't think a "Go Fund Me" page would get him there.  I also had a client spend $200 per year that will provide him with $2,000 per month in income if he were to become disabled.  Again, he will need a lot of friends to produce that much in donations monthly.  It tears my heart out every time I see a young family devastated by loss.  Whether that's loss of income or loss of a loved one, it's not something that can be replaced through "donations".  The only way to truly provide and protect your family is by pooling your risk ahead of time, not by pooling your donations after.  With insurance, we can protect our future, protect our income, provide for our family, and have the peace of mind knowing that those we love will be able to mourn our loss and not grieve for their future!

Mortality Credits???

What on earth is a mortality credit?  Lets look at a basic example I learned from Tom Hegna.

Ex:  5 old ladies meet one day and decide to each put $100 in a coffee can and bury it in the back yard.  They decide to come back in exactly one year and split the money equally.  Over the next twelve months one of the ladies dies.  When the anniversary comes each lady gets $120.  That's a 20% gain and they never even invested the money!  They decide to let the money ride and the next year two ladies pass.  Now each is entitled to $250.  They have more than doubled their money in two years!!

This is an example of mortality credits and it is part of what makes annuities a valuable tool.  Aside from gains, or potential gains (depending on the type of annuity), in the underlying investment, individuals who own annuities also reap the benefits of mortality credits.  This is a credit that is applied simply for making it another year.  Think of it as your birthday present to yourself!

There are many great reasons to consider an annuity as part of a complete investment portfolio.  We will consider these other benefits in a future blog.  Please email me to receive more information.

Holidays, the most productive work days!

Why is it that holidays all end up being the most productive work day?  Possibly because no one thinks that you will be working so the office is devoid of 'fires'.  Possibly because no one else is in the office working.  The peace and quiet of an empty office allows the mind to work freely and more to be accomplished.  Maybe it is because the clients who are the busiest, and therefore the hardest to reach, are home.  Whatever the reason, or maybe a little of all of them, I am thankful for holidays.  So that I can work harder and get more accomplished!

Reverse Mortgage - Financial Tool???

For years the idea of a reverse mortgage has been taboo to most people.  Financial advisors didn't discuss them with clients and clients were afraid they were losing their home.  Over the past handful of years, this stigma has started to change.  As well respected financial advisors, like Dr Wade Pfau, have conducted research into the benefits of reverse mortgages the mindset of advisors has started to shift.  Review the attached white paper by Dr Pfau which discusses the potential benefits of using a reverse mortgage line of credit.  The research that he completed is well documented and gives great insight to the potential usefulness of this tool.  As with any financial tool, it only has benefits when used in the proper situation.  Please consult myself or another advisor to determine if this tool might be beneficial to you.  If your current advisor isn't discussing all your available options with you those of us here at MBI would be happy to!

A new year......

As 2017 starts, RJ and I, along with the other members of MBI look forward to another great year.  We finished 2016 strong, with our new company, our new relationships, and new clients.  Are families have grown this past year and will continue to grow in 2017.  We can't wait to see all of you soon and begin to build on the strong start we had the back half of last year.