Market Recovery Program
It's legal, it works, and it's guaranteed!
Chapter 22
CASE STUDY #5: PETER, 60, AND JANE, 60
Who:
Peter, age 60, and his wife Jane, age 60
Particulars:
Peter and Jane lost 20% of the equity portion of their non-qualified (i.e. not in an IRA, 401(k), or other type of qualified account) investment portfolio which was worth $1.5 million just prior to the downturn. Thus, it is currently worth $1.2 million. Peter and Jane have sufficient income to meet all their needs and foresee having sufficient income for the rest of their lives. They have three adult children and 10 grandchildren. Peter and Jane are at a point in their lives in which they are adverse to risk.
Goals:
Peter and Jane want to: (1) recover the $300,000 they lost in the downturn; and (2) maximize the legacy they leave their children and grandchildren. They themselves do not need the money in their portfolio nor do they foresee needing it in the future.
Solution:
Life insurance.
The Indexed Annuity with Income Rider is not an appropriate vehicle to achieve their goal. The Market Recovery Program is designed to recover market losses during one’s lifetime, something Peter and Jane have no need for as they foresee having enough income each year for the rest of their lives. Rather, their desire is to maximize the legacy they leave for their non-spouse beneficiaries. This can best be achieved through life insurance, not annuities.
Peter and Jane may want to consider repositioning the entire remaining $1.2 million left in their investment portfolio into a one-pay Modified Endowment Contract (MEC). A MEC is a form of life insurance that, like regular life insurance, provides for an income-tax-free death benefit. However, properly structured, it can provide Peter and Jane access to cash during their lifetimes should they ever need it. They may also want to consider something called a second-to-die policy which will insure both of them and pay out upon the second death. This will provide a larger death benefit than if only one of them was the insured.
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