Frequently Asked Questions

NPPSS highlights five major financial risks that can affect retirement security: Taxes, Market Volatility, Inflation, Longevity, and Healthcare Costs. These risks can significantly influence retirement outcomes.

• Taxes: Future taxation on withdrawals from traditional retirement accounts may reduce savings.
• Market Volatility: Refers to unpredictable investment market fluctuations, posing a risk of losses.
• Inflation: The gradual erosion of purchasing power over time diminishes savings and fixed income.
• Longevity: The possibility of outliving retirement funds due to longer life expectancies.
• Healthcare Costs: Unpredictable and potentially high medical expenses during retirement.

By recognizing these risks, NPPSS helps devise strategies to manage them effectively.

NPPSS utilizes a structured three-step process to assess and address retirement risks:

1. Create an Individual Risk Profile: They evaluate your unique financial situation to identify and prioritize the risks you may face, assessing each risk's urgency and impact.

2. Develop a Protection Plan: Strategies are crafted to manage high-priority risks by deciding whether to assume, share (possibly with an insurer), or transfer each risk to another party.

3. Implement the Plan: The plan is finalized and executed, emphasizing the importance of early action to fully benefit from the strategies in place.

Index Universal Life (IUL) is a pivotal component of the NPPSS strategy as it addresses key challenges such as taxes, market volatility, and long-term care costs. IUL policies offer cash value growth that is linked to a market index but protect against market downturns, allowing for potential gains without the risk of losses from market crashes. Additionally, IULs provide tax-free access to funds through loans or withdrawals, offering tax flexibility. Many policies also include a Chronic Illness benefit or rider, which can help cover long-term care expenses. NPPSS often recommends considering the conversion of traditional retirement accounts like IRAs and 401(k)s to IULs to leverage these advantages.

Inflation represents the gradual increase in prices over time, meaning your money's purchasing power diminishes. What seems like sufficient savings today may not be adequate in the future as costs rise.

Consider this example: If a candy bar costs $1 today, but jumps to $3 in 20 years, the same dollar will buy less. As prices for goods and services increase, you'll need more money to maintain your lifestyle. Inflation can gradually erode your savings' value, so NPPSS develops strategies to help protect and preserve the purchasing power of your savings, ensuring they remain robust enough to meet your future needs.

Longevity risk refers to the potential of outliving your financial resources due to an extended lifespan. It's significant because with people living longer, there's a heightened concern of exhausting savings during one's later years.

Imagine planning a road trip (retirement) with just enough snacks (money) for the expected duration. If the trip lasts longer than anticipated, you'd run out of snacks. Longevity risk is akin to this scenario, highlighting the necessity of ensuring your retirement funds are sufficient to last throughout an extended life span. NPPSS focuses on addressing this risk to ensure lasting financial security.

A Roth Conversion involves transferring funds from a traditional retirement account, where taxes are deferred until withdrawal, to a Roth account, where taxes are paid upfront, but later withdrawals are tax-free. You might consider this if you anticipate higher tax rates in the future.

Imagine two piggy banks: one "traditional piggy bank" lets you deposit money without upfront fees, but charges fees when you withdraw. The "Roth piggy bank" requires you to pay a fee at deposit, but withdrawals are free. If you expect future withdrawal fees to be substantial, paying a smaller fee now for tax-free future withdrawals could be beneficial. This strategy allows you to manage tax liabilities, potentially reducing the total taxes paid over your lifetime.

Tax-deferred growth in an annuity means that you don't pay taxes on the earnings generated by the annuity until you withdraw the money. This allows your investment to grow more quickly over time because it benefits from compounded growth without the immediate drag of taxes.

Imagine your investments as a garden, where taxes are weeds that slow growth. By keeping the garden free of weeds for as long as possible, your plants (money) can grow larger and healthier. Tax-deferred growth is like managing the weeds efficiently, so when it comes time to deal with them (pay taxes), the plants (your investments) have reached their full potential, resulting in a more substantial overall growth by the time you access the funds.

Premium finance involves borrowing funds to pay for a substantial life insurance policy, such as an Index Universal Life (IUL) policy. This strategy allows you to secure greater coverage than you might typically afford with your own resources.

Similar to purchasing a house, where many people use a mortgage because they don't have enough cash to buy it outright, premium finance acts like securing a "mortgage" for your life insurance. This approach enables you to obtain a larger "house" (life insurance policy) than you could with only your available money, leveraging borrowed funds to maximize benefits and coverage.

An Index Universal Life (IUL) policy not only provides a death benefit like regular life insurance but also accumulates cash value linked to a market index, along with tax advantages. Imagine a regular umbrella that shields you from rain (regular life insurance). An IUL is like an umbrella with a container that collects rainwater (builds cash value), and that collected water remains tax-free, thus protecting you, offering extra resources, and providing tax benefits.

Planning for healthcare costs is crucial because these expenses can be significantly high, particularly as you age. Proper planning ensures you have sufficient funds to cover medical bills without depleting your retirement savings. Think of it as saving money for emergencies; just like needing funds to fix a broken car, healthcare costs are often more substantial and unpredictable. Early planning prepares you for unexpected "breakdowns" in your health.

An individual risk profile is a personalized evaluation of the specific risks you might face in retirement, akin to a report card highlighting areas to focus on. Consider it like a doctor's check-up, where your overall health is assessed and any potential issues are identified. Similarly, NPPSS evaluates your financial health in retirement, identifying risks that require attention.

NPPSS uses annuities to ensure a guaranteed lifetime income stream, providing financial security regardless of how long you live. It's like having a magic money tree that continually produces, ensuring you always have a steady "harvest" of money and never run out of "fruit" (financial resources) in retirement.

Absolutely! Speaking with NPPSS can be beneficial as they can review your existing plan, identify any gaps or risks you might have overlooked, and suggest improvements to strengthen it. Even if you've already started building your retirement "house," having an expert inspect it can ensure your foundation is solid and secure.