Business Innovators Radio - Interview with Kimberly Pohler, Financial Strategist with Pohler Financial Discussing How Life Insurance Fits Into Retirement

Episode Date: March 18, 2024

Kimberly Pohler, CLTC, CFed®, is passionate about helping others. She helps her clients navigate the confusing world of finance by educating them on how to plan for each season of their life. It goes beyond protecting your health. Kimberly has identified many crucial areas of concern: health, life, disability income while you’re working, senior healthcare, Social Security, longevity (never running out of money), the high cost of aging impact on investments, and protecting a legacy for her client’s children. She uses her extensive knowledge as well as a team of specialists to provide cutting-edge resources in an ever-changing environment. She knows that God blesses us daily with the gift of life and the opportunity to make a difference in the world. Each new relationship in her business and personal life is meant to be cherished.Kimberly is an avid gardener who also enjoys cooking what she grows, hiking, campfires, and family fellowship. She lives in rural Indiana with her husband, Jeremy, her two sons, Blake and Preston, and their fur baby Yorkies, Brianna and, Finnegan, and their German Shepherd, Gus. She is the author of The Money Garden: Purposeful Financial Planning for Your Seasons of Life.Learn More: http://www.kimberlypohler.comInfluential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-kimberly-pohler-financial-strategist-with-pohler-financial-discussing-how-life-insurance-fits-into-retirement

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with us Kimberly Polar, who's a financial strategist with Polar Financial, and we're talking about how life insurance fits into retirement. Kimberly, welcome back to the program. Hi, Mike. Thank you.

Glad to be here. You are welcome. You're welcome. I'm excited to talk with you. And I think that we probably lost half the people because I said the word life insurance. And I know that is red flag slammed the brakes on. So we want to dive into going, wait a minute. How does life insurance fit into retirement?

Because a lot of times people don't think of it connected that way. So let's talk a little bit about that. When you're working with your clients, what are you starting that conversation and that thought process to educate them on how life insurance fits into their overall retirement plan. That's a really good question because you're right. A lot of times they see deer in the headlights whenever you talk about life insurance because they don't see it as life insurance. They have an opinion that is death insurance. And the goal that I generally have is it is life insurance and it's said that for a reason. And the purpose of that is that there's,

is a place for it in our retirement planning and it should be in our retirement planning. There's different types of life insurance that are used for for different reasons when you were doing the planning process. But the big emphasis is getting them to really understand that we've kind of been conditioned in a certain way of thinking and that life insurance gives us the ability to have a retirement that is more protected and allows us to actually live in our retirement more more effectively. Yeah, I like that correlation of people think of it as death insurance because that really is. It's like, oh, I've got my life insurance policy.

When the death happens, then that pays out. And there it is that you kind of mentally peg that to death. But how should it be viewed from the life standpoint? Well, from the life standpoint, we're looking at life insurance for a couple different areas. An example would be you're using the life insurance for creating cash value if it's like a whole life policy or a index universal life policy. And there's so much more to that than just creating that cash value. The one thing I do want to say is when we talk about life insurance with the mindset of it having being a death insurance, it act, to me, that is a term. The reason is we are purchasing that product.

And there's a big difference between the products. And I think maybe the misunderstanding of what those products really are is the problem. But term insurance is actually ensuring yourself that you are hedging your bet that you are going to die. And you want to leave benefit to your beneficiaries. So I consider that more of like the death insurance side because there is no cash value and it's only going to stay in place for a period of time. And once that term is up, the insurance is gone. If you haven't passed away, then it's not there anymore. But if you have passed away, then your beneficiaries have been protected.

But so that's a little bit different. And the life insurance side, when I talk about using Whole Life or Indexed Universal Life, we are looking at not only covering any event that the client passes away so that the beneficiaries have money to continue living on. we like to say, you know, we want the beneficiaries to be able to maintain the same lifestyle when they lose their, you know, the loved one that gave them the coverage. But we also want to build cash value that they have the opportunity to fund inside of their actual retirement and potentially have living benefits. A lot of our products today are so much more structured around living as far as

as what if we get sick? What if we have critical illness happen and we need benefits? You need that living benefit there. It's a resource to give you extra cash inside of that to help the family through some of those difficult times that maybe we're not really prepared for, didn't see coming. So I do like life insurance for more of a protection of the actual full retirement accounts itself. You don't have to tap into them as much. Right.

I mean, a lot of people don't think about that life insurance having the ability to accumulate cash, like, you know, grow and all of that. So, so, you know, that actually is then a benefit during, you know, the living years. If someone is seeing that, you know, five, six, seven years into the policy and they see some cash value growing, how can they access that if they needed to? Well, there's a couple different ways to access it. You can always do withdrawals, but that's not the most efficient way to use a life insurance policy. In all actuality, more times they're going to take a loan against the policy itself. And a lot of people don't even understand how that all plays in and wrapping their mind around it. But we're taking the power of collateralization and being able to utilize the money inside their own policy.

to borrow to fund whatever's happening. If it's a sickness or maybe they need a new car or a new roof on the house, it gives them power over their life a little bit more than what. Maybe they had anticipated because their bank accounts, they see those as, okay, I have X amount of dollars in my retirement account. And if the roof goes bad, I have to borrow or pull from there. Well, now you've created this taxable event. But the nice thing is inside of the life insurance,

that is loaned out money. money that they can utilize. So it's a cash vehicle for them. And at the same time, if they pass away, they still have the death benefit in place that's going to transfer that money over to their ears. Yeah, that's a multi-use benefit that way. It kind of gives you even more peace of mind, you know, because typically, you know, you don't get in life insurance for any other benefit other than peace of mind to take care of your family. Well, this now is providing for more of that. Like you said, cash value and accessing it. And we had talked about previously some of the potential needs of needing long-term care.

Well, if you've got enough cash value there or maybe have some type of a provision in that life insurance, maybe that takes care of long-term care if it arises and you didn't plan for it cash-wise, right? Yes. We use that as one of the available resources for clients to use to help pay for that sickness because, you know, in a lot of cases, they don't carry coverage, long-term care, traditional long-term care coverage or have even enough of it at the rising cost of what the sickness levels are in paying for care in a long-term facility.

So that is one thing you can do. The nice part is this, I always say that cash value life insurance, among all the other things that we use, gives you the ability to take $1 and have it do multiple purposes for you. So it's a, it's a very efficient way to make your dollar, stretch your dollar and make your dollar work harder for you. You know, growing up, I always heard, you know, you want to work smarter, not harder. So cash value life insurance to me is one of the key ways that you make your dollars work smarter for you instead of you going up here and having to keep working and earning more and more money just to try to with a goal in mind to

retire and supplement your income in retirement years. You know, I think that some of these benefits you're mentioning with the cash value type of insurance, the permanent insurance, is so different than what people typically think of when they think of life insurance because typically they think of term. Like, I'm going to buy a 10-year term, 20-year term policy, which protects if you die, then it pays out. Well, that's the only benefit. And once that term ends, 15, 20 years down the road, you might need to get another

term policy, but now you're 15 or 20 years older, and maybe the premiums have gone through the roof and maybe your health has changed. So talk a little bit about the difference between the term policies and the cash value permanent side of things. Well, for one thing, just like you said, the term policies, they're going to be set for a 15, 20th, and maybe even a 30-year term, depending when you took it out. And so the premiums are going to be set. The time frame is going to be set. And if you don't end up passing away so that benefit is not paid out and you get to the end

of the term, the problem you have is for most, now you're older and now you're going to go through a challenge. Maybe you have some health conditions that are going to not make it very easy for you to rewrite into a different policy. Now, you can convert some terms. Most terms will allow you to do that. The problem we run into is those terms become, to rewrite it into a permanent policy becomes very costly. And unfortunately, that's when we'll see people that'll just have to opt out.

They'll say, I cannot afford these premiums anymore on this policy. And so they have their place. I don't want anybody to think that they don't. Term insurance we use a lot when you're younger and you have a, you know, you're a young family and you're trying to secure the family with more money because you've got kids at home and you've got a house and you've got cars and all this stuff that maybe the bread winner needs to make sure is covered in an event they pass away. But as you get older, especially like when you get to about 70, a lot of these terms,

people are not going to keep in place because the cost is too much or they expire. They flat out do not renew. So that, you know, there is a place for them. And sometimes we use term inside of a permanent policy because we will utilize that to help drive down the cost of actual insurance premiums to make it more efficient, to be able to give them more death benefit. But the actual difference between that and the permanent life insurance itself is permanent insurance is exactly what it is. It's permanent insurance. There's a couple different ways that those can be structured. you know, they can be structured what we call like a 10 pay where you pay in, you invest,

kind of like you do in your retirement account, you invest and pay that premium in for 10 years straight. And at the end of the 10 years, you don't invest any more money into that policy, but it's yours and it's there for the rest of your life no matter how long you live. And the nice part is that has cash value in it. So the cash value is sitting there and it's earning growth inside of that product so you can pull money out. You know, maybe it's 10, 15 years down the road and you're retired out. But the great part is you don't have to pay premiums anymore on that. And you don't have the cost continuing to rise on that because it's already locked in.

You've already taken care of that. The other option is to, you know, there is IULs and universal IULs are indexed universal of lives. And those policies, in a lot of cases, you're paying a premium and you'll pay it for the duration of time. You can do a paid up policy. So maybe you get tired of paying on it and you'll pay the policy up later in life, but it's still a permanent insurance. And it's all in how they're structured and how the growth inside of those products works. So there's a couple different, you know, options available to a client to choose. And really, we look at that as far as what their actual needs are and what the goals that we're trying to achieve and what's going to

make the most sense for them. But ideally, either one of the permanent ones, our permanent insurance is going to stay with them for the duration and provide income or cash flow. Actually, it's not even income. It's cash flow to them through their retirement years and then also at the same time give benefits to their family. So. And like when we're talking about all of these living benefits that you've been mentioning, this might sound wonderful. And you go out and Google, let me go get one of these things. I would venture to say that it's very intricate to get it set up the right way and the right kind of policy. So you might want to make sure you're not just going out Googling saying, give me one of those?

Oh, there is so many different types of structuring inside of these policies, depending on what your specific needs are, that that would not probably be what I would recommend you to. Because, you know, at the end of the day, you're wanting to put together a plan that's going to provide you, the peace of mind, the protection, the security of knowing that you've covered yourself, you've covered your family, and, you know, and at the same time, been able to, hopefully been able to transfer wealth, transfer money to your future generations, your grandchildren, or whoever that is. And so, yeah, I think that you have to be really cognizant. There's a lot of information out here on the internet, but you also have to understand that

the structuring of how that policy is built can be all the difference between having a policy you're really happy with or having a policy that now you are in your mid-70s and it's permanent insurance, but you just got noticed that if you don't keep paying the premium on it and now the premium has tripled inside of that product, you will have no life insurance. That is a terrible position to be in and we have seen people in those positions and it does come back to that it was not structured in the right way to be able to withstand the test of time. Yep. Wow. So I know when you pull money out of retirement accounts like IRAs, 401Ks, there's tax aspects to consider. How does it work with this permanent insurance policy when you take money out? Because you were mentioning you don't withdraw it. You borrow against it. How does the taxes work with that? What are some benefits that way? Well, the greatest benefit is there is no taxation there.

Because, you know, when you go look at our tax code that's 111 years old, our tax code says that when you borrow from your own policy, you are actually borrowing the cash value that's inside of that policy. So you're borrowing cash. You are not taking actual income. It is not counted as income. so it's not reportable. So this is probably one of the most misunderstood and overlooked areas that I've seen out of the people that I've been working with over the years. It's just getting them to understand the power behind that is, you know, the cash value inside there is tax free to you. I don't mean tax free.

I guess I should say it this way. Tax exempt to you because it is. tax exempt. It's not tax free because when it went in, it was taxable. But when it comes out, it is coming out as withdrawal. So therefore, there's tax exempt status there. And then the plus side of it is when you pass away and the money that you're giving to your beneficiaries to help them deal with the transition period and all the things that need to be taken care of, that money is tax exempt as well to them. So it is one probably the more powerful ways of utilizing your money in your planning process, but probably not utilize as much as it should be.

You know, I think that that last piece you mentioned transferring money to errors, a lot of times people aren't really recognizing the full importance of that because, well, I'm gone and here's the money and let them deal with it. But if you transferred your 401k or your IRA to family members, they are dealing with tax implications. However, that needs to look. We don't need to get into that. But if that slate is clean for this kind of product, this financial tool, what a huge gift that is when you're planning your legacy to transfer your retirement assets to your heirs to realize that this piece right here is not going to trigger those taxes for them. And that's a huge benefit that they might not realize until that it's happening. So I think

that's a piece that, like you said, people just don't really pick up on. Absolutely. And, you know, I feel like it is really one of the areas that if we can bring more awareness to the understanding that this can be such a powerful tool in their planning and structuring the whole plan for their retirement, I think more people would use it. And it's just you can really bless your family. and whoever, even charities by just proper planning and understanding what's available to us out here. And I think that's the big key for me is educating on them what is actually available.

100%. Well, Kimberly, I think we have successfully articulated how life insurance, believe it or not, fits into retirement. So that's been really helpful for me to learn. So thank you for that. If someone is interested in learning even more and reaching out and connecting with you, what's the best way that they can do that? If they would like, they can visit my website at Kimberlypolar.com or they can, to learn more information, we have different pieces of information out there for them to gather and learn.

And they could also call into the office if they'd like to set a time to have a conversation. The phone number here at the office is 260, 306, 3456. Wonderful. Well, Kimberly, thank you so much for coming back going. It's been a real pleasure. talking with you. Thank you, Mike. Thanks for having me. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.com.com.com.