Rethinking Retirement: How Life Insurance & Fixed Index Annuities Can Play a Strategic Role

At Summerlin Benefits Consulting, we believe retirement planning should go beyond simply accumulating savings. In an era of longer lifespans, market turbulence, and uncertainty around how to generate income in retirement, it’s wise to consider how you’ll draw income, what risks you face, and which tools can help you meet both income and legacy goals.
 
In this article, we’ll explore how life-insurance-based strategies (particularly indexed universal life – IUL) and fixed index annuity solutions can complement traditional investments, improve outcomes and enhance flexibility.

1. The Changing Retirement Landscape

More people are facing three major shifts:

• Longevity – Retirees now may spend decades in retirement, increasing the risk of outliving their savings.
• Market & inflation risk – Traditional portfolios are exposed to sequence-of-returns risk, equity downturns and low returns in fixed income.
• Fading pensions, rising responsibility – With fewer defined benefit plans, the burden for securing income falls on individuals and their advisors.

Given these dynamics, strategies that simply rely on “save and invest” may not fully address the income and legacy challenges many clients face.

2. Beyond Investments — Why Add Life Insurance and Fixed Index Annuities?

Traditional portfolios serve an important role, but certain additional tools bring features that can fill gaps:

• Fixed Index Annuities can offer guaranteed income for life, principal protection in many designs and relief from market timing risk.
• IUL (Indexed Universal Life) can build cash value with downside protection, offer tax-deferred growth, and potentially tax-free access via policy loans (when structured correctly) as well as a death benefit.
• Combined, these can create a hybrid solution that allows portfolio growth, income certainty, protection from downside, and legacy potential.

3. What the Research Shows

Recent modeling (via Monte Carlo simulation across many market scenarios) reveals interesting patterns:

• Strategies that mix insurance tools (IUL + indexed fixed index annuities + investments) often outperformed investment-only strategies when looking at two key outcomes: sustainable retirement income and legacy value.
• For example, in one scenario with a 65-year-old couple allocating 30% of retirement assets to an IUL and 30% to a fixed indexed annuity (with the rest in investments), the result showed about a 5.5% increase in retirement income and roughly a 29.6% higher legacy value compared to an investment-only portfolio.
• Insurance solutions were treated in the model as part of the “fixed income” or conservative bucket thereby allowing reduction in traditional bond holdings and freeing up more room for equity growth.
• The tax-efficient nature of IUL (growth not taxed until withdrawn/loaned, death benefit typically tax-free) and fixed index annuities (tax-deferred accumulation) helped improve net outcomes after taxes.

4. How to Think About the Roles

When picking which tool to lean on, consider these points:

• Income maximization → Fixed Index Annuities (especially those with lifetime income features) tend to shine when the primary objective is reliable cash flow in retirement.
• Legacy preservation / wealth transfer → IULs can be structured to provide death benefits and tax-efficient access so they favor clients with strong legacy goals.
• Balanced objectives → A mix of both (e.g., some allocation to IUL, some to fixed index annuities, rest in investments) offers flexibility and allows for tailored outcomes.
• Liquidity & flexibility → While fixed index annuities often reduce access to capital (in exchange for guarantees), IULs can provide an accessible cash value buffer that can be used in downturns instead of tapping equities at the wrong time.

5. Why Partnering with Experienced Advisors Matters

Successful implementation of these tools often requires a deeper understanding of product features, tax implications, design trade-offs, and long-term modelling. At Summerlin Benefits Consulting, we support clients by:

• Reviewing how insurance-based solutions fit into your overall portfolio.
• Customizing allocations based on individual goals (income, legacy, risk tolerance, time horizon).
• Coordinating with tax and legal advisors to align distributions and estate planning.
• Keeping an eye on the evolving market, regulatory or product developments so the strategy remains current.

If you’re interested in exploring how these tools might support your retirement plan, or want a tailored modelling scenario, please Contact us to schedule a consultation. At Summerlin Benefits Consulting we’re committed to helping you build a retirement strategy that goes beyond saving, to delivering confidence in income, flexibility, and legacy.