Benjamin Franklin said, “You may delay, but time will not.”
This is painfully true when it comes to funding a life insurance policy to generate supplemental retirement income. Since life insurance is probably not on the top 10 list of topics for discussion for most of us, unless you’re a life insurance agent, many of my perspective clients that have a desire to acquire a policy to protect themselves and their family, and to accumulate tax favored wealth, have decided to put it off for a few months. Those few months tend to become a year or more.
These individuals have the time value of money working against them.
Let’s take the case of a healthy 40 year old male who would like to put $300 a month into a Indexed Universal Life policy to provide supplemental income for himself when he retires. We will assume that he will retire at age 68. Why am I assuming age 68 and not age 65? I would rather err on the side of caution and the way things look in our country none of us would be shocked if they raised the age of social security for someone that is 40 years old today, right?
I ran two policy illustrations for this 40 year old with only one difference. I ran one illustration and age 40 and one illustration at age 41. In both illustrations he paid $300 a month until age 68 and then started taking income. You may be surprised at the results. Starting just one year earlier at age 40 rather than age 41, his annual projected income until age 120 produced $3736 more per year for the rest of his life. He “saved” $3600 for one year yet that savings cost him $194,272 once he started his distribution.
There is a hefty cost for procrastination.
“Procrastination is one of the most common and deadliest of diseases and its toll on success and happiness is heavy.” Wayne Gretzky