I always wondered when someone self-insured for life events if they had too much insurance.  We received a new client a few years back, and she had four whole-life policies and was collectively paying around $80,000 a year in premiums.  I asked why she had so many, and she didn’t know why but was told she needed them for the potential tax-free withdrawal from the cash value in retirement.  I also asked if she looked at what she needed in retirement for income or looked at a financial plan to see what was important in her life & why.  She answered “no” and didn’t know what a financial plan or a retirement plan was.  Full disclosure: I wasn’t in the room when she bought all four whole-life policies, but I could see that the $80,000 a year was starting to cause her stress.

Before offering any recommendations, we decided to create a plan with and without the whole life policies to see what it looked like at retirement.  A little background:

• The client was 48
• Occupation – ENT Doctor/business owner
• Wanted to stop working at 52
• Current Situation: she had saved well in a Brokerage Account & 401K
• The client wanted $150,000 a year starting at 52, growing with inflation
• No Mortgage

After reviewing the plan and determining what was important, we realized that despite the stress of the payments, she had met her desired income from life. She could leave a legacy without insurance if she wanted to retire at 52. She could also use that $80,000 savings for her passion project, documentaries.  

We did end up canceling the whole life. We performed a 1035 exchange in a non-commissioned investment-only variable annuity (cutting on cost).  She took a loss on the surrender but made that up in 12 months from not making $80,000 in premiums and receiving market returns. 

So, when there is too much, it is too much.  

Ask yourself: If you don’t have a financial plan, how do you know what you need and don’t from an investment standpoint? 

Chris graduated from the University of Maine, where he played hockey on a scholarship, and retired from professional hockey in 2007. In the community, he remains engaged, serving as a youth hockey coach. Chris holds the CERTIFIED FINANCIAL PLANNER™. Outside the office, he enjoys trying new food and wine, reading, traveling, playing golf and hockey, fat tire biking, and donating to local charities. His passions include being a husband and dad, lake life with the family, watching his son and daughter play sports, and spending time with his wife. To learn more about Chris, connect with him on LinkedIn or schedule an appointment with us.