Essential Advanced Planning Life Insurance Tips For Seniors

There are many scenarios in which life insurance can really save the day when it comes to aiding seniors in dealing with arduous long term complications. It can be helpful to any advisors as well. In other cases, it serves to act as leverage when no other financial options manage to do so. Of course, life insurance also acts as an important long term planning tool for seniors.

When it comes to advanced planning, topics like final expense don’t really come into play. It’s also a separate idea from life insurance as a whole. Certain forms of life insurance have cash value components and incredible death benefits that make them absolutely vital for both the individual and anyone they may eventually leave behind.

seniors on a bench

Here’s just a small taste of what life insurance can provide:


• Maximization And Planning For Pensions

• The Creation Of A Legacy

• Donations To Charities

• Planning For Estate Taxes

And of course, there are many more. Let’s just focus on these for now!

1 – Pension Maximization

Pensions grant many seniors some form of income after they’ve retired. They aren’t particularly common these days, but some notable occupations do still offer them.

One of the best aspects of pensions is the options they give each individual on how they will receive their money over the years. It must be noted that your choice on the matter will be final however. Here are the two most important options:

• Life Only

This payment type will allow a recipient the best possible benefit on a monthly or even annual basis. The benefits end upon the passing of the individual.

• Survivorship

This style of payment includes a surviving spouse, paying out to both parties until they have each passed. The total monthly payments are lower than the “Life Only” option.

It can be difficult to know which option is best for you. Is it better to take a higher amount while hoping to take advantage of it for many more years? Taking this gamble could mean far more money overall. If you take the smaller amount however, you’ll have the security of knowing your spouse will still be taken care of should you pass.

One of the best solutions comes in the form of maximized pension with life insurance.

Basically, the Life Only option will be taken in effort to afford an individual the highest level of income currently possible, and a small amount of that will then be used to buy into a permanent life insurance policy. The cost of life insurance is essential here.

A max pension plan will only perform as expected provided the cost of the insurance plan is lower than the difference between what could be earned by choosing either Survivorship or Life Only. Additionally, the insurance policy that’s being purchased must be substantial enough to accommodate the surviving spouse to an adequate amount, preferably equal or more to what they’d receive with Survivorship after annuity.

Provided all of this works out, the total amount received is often more than electing Survivorship would grant. The alluring catch is that it still offers an incredible degree of financial security.

2 – Legacy Creation

It’s common for seniors to mull over their options when it comes to passing along their assets. Everyone hopes to be able to take care of those they leave behind, both friend and family alike. When assets have been liquidated, they can lead to incredible leverage when it comes to the use of an insurance policy.

The two key aspects that make this work so well are:

• Most of the time, life insurance payouts are higher than what was initially put down.

• Payouts on life insurance polices are completely tax free.

If a senior holds quite a large number of assets that they hope to pass along, their importance can not be undermined. This is especially true when it comes to taxes. Money that may have been invested in something like CD’s will need to be treated in a different manner than money that’s been bestowed thanks to a life insurance policy because of the differences in taxation. It doesn’t even matter if the amounts are the same.

Money that has already been set aside for certain individuals or an organization is put to use much more efficiently through a life insurance policy. The benefit will actually be greater, and the taxation will be far more favorable to whomever is receiving it.

3 – Charities

Many people find some form of charity that they believe in over their lifetime. It may be a particular organization, a hospital, a church, a university, or any other group. Giving to charity obviously helps those causes greatly, and of course it also serves as a major deductible for the benefactor. This is what we call a serious win-win!

Charities accept donations of many kinds of course. However, monetary gifts remain as the most common and widely accepted form of support. With a life insurance policy that focuses on leverage, it’s quite simple and beneficial to arrange this sort of donation.

If you can transfer any ownership of a particular life insurance policy to a worthy charity, you can also name them as the beneficiary. This will give you an instant tax deduction, as well as a deduction on any payments you’re expected to pay on the policy down the line. The charity themselves will luckily receive all of the funds completely tax free.

4 – Planning For Estate Taxes

Families that establish a sizable estate will need special planning when it comes to passing everything along to their heirs. Otherwise, the entire process can become quite hectic. You will be exempt from any of this sort of planning if your estate is anything lower than 5.5 million dollars however.

If that number has been hit however, every asset within the estate can be taxed quite highly. It doesn’t even matter if everything has become liquid. Fortunately, the right life insurance policy can offer an incredible solution to help make all of this less of a pain in the long run.

It must be understood that using life insurance to handle estate matters requires a lot of input from different parties however. You will likely need to work with a tax lawyer, insurance agent, estate planner, accountant, and possibly several other individuals. This is essential to make sure everything is done according to the law while also assuring the highest possible benefit for anyone included in the estate.

The Bottom Line

It should be more than clear that there are a wealth of things that you must consider when it comes to life insurance, especially if you’re already a senior. Life only gets more and more complicated as we age, doesn’t it? The same is naturally true for financial planning and insurance matters. Luckily, no one has to tackle all of this alone. There is more than enough information out there to help you understand your options and which particular path will help you and your loved ones benefit the most.

Above all, there are three things you should focus upon …

The Value

The Style Of Product

The Company You Choose

If you focus on making the right choices in those areas, the entire process of finalizing your life insurance plans will be much simpler. It may be daunting to think about buying a life insurance policy at all, and that’s understandable. You don’t want to take too much time getting around to it however. Don’t let yourself be yet another of the many individuals whose lives are unfortunately cut short without any proper planning!


Tackle the subject responsibly and realistically, and ask as many questions as you feel you need. You can consult with a financial advisor, agent, accountant, or even a lawyer. If you’ve established a positive network of people around you, you should be able to find all of the help you may need in making your final decision. With some hope, all of the details above should have at least gotten you pointed in the right direction. Head these words carefully and all should be well in the end!

Retirement Planning and Annuities

Annuities are available in all shapes and sizes. I don’t sell these products or earn any commissions from them, so I do tend to be wary about what the motives are backing many of these types of sales, especially when it comes to variable annuities, which are quite lucrative:

Complex variable annuities get oversold to people who don’t fully understand. This type of annuity is very hard to comprehend and incredibly complex.

Variable annuity salespersons earn very high commissions on these products; they are very motivated to try to sell them to you. A salesperson working on commission is looking out for their own interests and not yours.

You should only purchase annuities if the benefits are very compelling and complement your overall financial picture. Annuity salespeople tend to focus on closing the deal rather than considering the client’s overall financial situation and where the annuity might fit into that.

Annuities are not a good choice for everyone. If you are on Social Security, then you have an indexed, fix annuity already that is going to keep paying you for the rest of your life. The same thing is true if you have a pension. That is fixed annuity that also pays for life. The insurance element in an annuity, if nothing else, means that you will lose if you don’t live as long as some of your friends since your monthly payments will be redirected to other annuity owners who live longer than you.

So when it comes to annuities, what is the good, bad and the ugly?

The following is the smell test I use for Annuities:

The Good

If you earn a high income and are in a high tax bracket, then it might make sense to invest in a low-cost variable annuity if you have already maxed your IRA and 401(k) deferrals completely and are expecting that when you retire you will be in a lower tax bracket. The charge on a low-cost variable annuity is less than 1% annually.

A low-cost variable or fixed annuity might make sense if you are wanting to take a lump sum of money and convert into an income stream and you are able to afford for the money to be tied up for an extended amount of time (potentially forever).

If might be wise to invest in “longevity annuities” if you are worried that you will outlive your assets and you have the ability to lock some of your assets up in an annuity. You can set up a longevity annuity to start an income stream late in life. For example, Jane is 72, is in good health and longevity runs in your family. She places a maximum of 15% of her total investments in a deferred fixed annuity. Jane will start receiving monthly income payments from her $150,000 investment as soon as she turns 80 years old; those payments continue until her death. If she dies prior to receiving any payments, then the principle might be returned to her without any interest, but if she dies after she starts receiving her income stream she might have to forfeit the whole annuity.

There are new initiatives from the government to allow 401(k) investors to place part of their accounts into annuities. The government is worried about poor returns on 401(k) investments due to the fact that investors don’t always make wise investments. Providing annuities as an option is viewed as a way of providing more certainty and predictability for retirees.

A charitable annuity can be a great way to make tax-deductible donations to charities and get part of the donation as an income stream for life.

The Bad And Ugly

You can be stuck with a 3-4% annual fee on a variable annuity along with serious surrender penalties (up to 15 years or even longer).

If you are considering variable annuities that come with lots of bells and whistles but you really don’t understand them (does it seem to god to be true?), then I recommend that you get a second opinion from somebody who doesn’t benefit from the annuity sale.

Are you in a moderate or low tax bracket? Purchasing an annuity using after-tax dollars (in order to defer investment income) might be disappointing to you if you end up with a high-income tax bracket after you retire due to significant RMD distributions from your 401(k) or IRA, or due to overall tax rates being likely to increase in the future.

Also, if you use after-tax money to buy an annuity, it might end up being a poor tax decision. You will be trading lower tax rates on capital gains on taxable income for higher tax rates on ordinary income on your annuity gains.

It isn’t necessary to have an annuity as part of your IRA if you are wanting to defer income because an IRA is tax-deferred already. When an annuity is held in an IRA it is mostly redundant unless you are specifically wanting the mortality/insurance benefit.

A fixed annuity might augment you overall investment/financial strategy. However, currently, interest rates are very low. You would be much better off purchasing a fixed annuity where the higher interest rates are locked in where there are higher interest rates.


Your money might end up being tied up for the rest of your life. You cannot undo an after-tax annuity. Once your money gets put into an annuity structure, it has to stay in an annuity structure. There is the option to roll an ugly or bad annuity into an annuity that is less expensive if you don’t have surrender penalties any longer. However, the annuity structure itself cannot be terminated.

Do you plan on leaving your variable annuity to your heirs? Annuities that are invested in equities do not make a good inheritance since there isn’t any step-up in basis on the position’s death value on the date when the annuitant (initial owner) dies.

In summary, for some people, fixed annuities might be attractive when interest rates increase.

In my opinion, there are more cons to variable annuities than pros and you should only buy them after doing your due diligence and receiving an unbiased second opinion.