Succeeding With Whole Life

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Advisor Steve Vasgaard helps his clients make the leap to financial stability.

Experienced senior market advisors can recall when the stock markets could do no wrong. Clients­—and many advisors—assumed that stock and mutual fund portfolios would grow consistently by double digits. In contrast, cash value life insurance products were deemed a low-yield waste of money. The smart strategy was to buy term insurance, invest the difference and watch your nest egg grow.

Fast forward to 2012. In the past decade investors have suffered through bear markets and flash crashes while the overall U.S. equity markets produced flat returns. Europe’s financial crisis and the sputtering domestic economy dominate headlines and the markets’ short-term results. Low interest rates make it almost impossible for savers to keep up with inflation and taxes.

It’s a tough environment, but Steve Vasgaard with Wealth & Retirement Strategies Inc. in Knoxville, Tenn., continues to prosper. Vasgaard was the top producer in the OneAmerica system in 2011 and surprisingly—or perhaps not surprisingly, in the current uncertain environment—he’s succeeding with whole life insurance.

Making the LEAP

Vasgaard, 63, started selling individual and group health insurance in 1984. In 1995 he transitioned to financial planning and at first used what he calls the “accumulation of money” theory in his work with clients. That approach didn’t produce the desired results for clients, though, so he switched to the Lifetime Economic Acceleration Process (LEAP). “My whole success has really come from using the LEAP planning financial model where I eliminate feeling, opinions and emotions,” he says. “I’m able to verify scientifically what they should do so my clients know that they’re making the best financial choice they can possibly make.”

Vasgaard estimates that 75 percent to 80 percent of his current clients are baby boomers and retirees. He describes them as typical middle-class America, with family incomes in the $100,000 to $200,000 range and several hundred thousand dollars in accounts such as IRA plans.

“Everybody is light years behind how much money they should have saved at this point in time in their lives.”

These investors thought the stock market’s performance in the 1990s would continue forever and now they’re facing a new reality, says Vasgaard. “For the last 12 years the growth they thought they were going to have never has materialized,” he says. “So everybody is light years behind how much money they should have saved at this point in time in their lives.”

Those circumstances strengthen Vasgaard’s case for whole life insurance. He cites an example of a client with a $1-million portfolio. The usual recommendation for sustainable lifetime withdrawals is about 4 percent per year, or $40,000 in this case. That strategy, which Vasgaard calls an asset-only retirement, often fails to produce enough income for the client, however, he believes. As an alternative strategy, Vasgaard often recommends annuitizing part or all of the $1 million, a step that can yield significantly more than $40,000 per year. The client simultaneously buys life insurance for the amount of the assets that he or she annuitizes. That coverage allows the client’s estate to replace the annuitized assets for the benefit of a surviving spouse or other heirs.

“One of the things I do is to create the options when they (clients) retire,” says Vasgaard. “When you have an asset-only retirement you have literally no options whatsoever. But if you have life insurance equal to the size of your asset then you increase the options. In today’s low interest rates $1 million (annuitized) would generate close to $80,000 guaranteed income as long as he’s (the client is) alive. But without the life insurance in place you have no options. You have to live on the interest that you can generate from your million dollars.”

“When you have an asset-only retirement you have literally no options whatsoever. But if you have life insurance equal to the size of your asset then you increase the options.”

By Financial writer, Ed McCarthy, CFP for the September 2012 issue of Senior Market Advisor.

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