Retirement planning is a crucial aspect of financial management, as it enables individuals to secure their financial well-being during their golden years. One approach gaining attention in recent years is the Kai-Zen^® retirement plan. Derived from the Japanese concept of “kaizen,” which means continuous improvement, the Kai-Zen^® plan emphasizes a proactive and iterative approach to building a sustainable financial future.

401k’s and IRA’s are a great tool to save for retirement, but will it be enough? The Social Security system faces long-term financial challenges, can we rely on it? The answer for many of us is that it won’t be enough and it’s not prudent to rely on it.  For those of us looking for a broader strategy to supplement retirement income a Kai-Zen^® plan may be the answer. In the following, we will delve into the principles and benefits of Kai-Zen^®.

Kai-Zen^® is a cash accumulating indexed universal life insurance policy. By design they are more about accruing value rather than funding a large death benefit. This helps in reducing the typical expenses associated with funding life insurance.

Life insurance inherently provides potential for tax-free distributions when accessing cash value via policy loans. This is particularly advantageous compared to the taxable withdrawals associated with qualified plans (IRA’s, 401k’s etc.).  Qualified plans affect Social Security tax and IRMAA (Medicare payments) while Kai-Zen^® does not. There are no age restrictions when it comes to distributions and no Required Minimum Distributions like those associated with Individual Retirement Accounts (IRA’s) and 401k’s.

Kai-Zen^® plans utilize leverage as a tool to compound growth. Much like we would use a home loan to purchase our larger dream home or upgrade a vehicle, the goal with Kai-Zen^® is potentially a bigger retirement savings. The potential growth is up to 60 to 100% more* than what your savings can achieve alone, when connecting Kai-Zen^® with leverage. Since the policy and contributions offer the security necessary to fund the loan you don’t have the typical lending guidelines. There are no credit inquiries, no loan documentation, no personal guarantees, and no interest payments made personally.  The life insurance policy is sole collateral  for the loan.

If you are market risk adverse, Kai-Zen^® may have some potential benefits you may align with. There are no negative market returns, as you are protected with a 0 floor, which can be advantageous during volatile markets. Your potential gains are locked in via upside crediting, subject to possible cap based on insurer.

Kai-Zen^® also has some of the additional advantages that come with life insurance. There is a guaranteed death benefit and some companies offer living benefit riders which allows you to accelerate the death benefit in the event of a critical, chronic or terminal illness just to name a few.

So, what’s the downside?  There are most definitely some important factors to consider. Similarly, to funding your typical retirement plan it’s necessary to understand that these are long term investments.

Personal funding  contributions are necessary for a 5-year period.  The bank will also fund those initial 5 years (via the match).  The bank will then provide the full payment (client contributions and bank contributions) for the next five years.  The loan repayment is typically in year 15, which you have the option to pay the loan back from the policy cash value or personally if you wish to take advantage of additional compounding interest and tax deferred growth.  You also have the option to access the funds prior, but ideally a 15-year commitment improves your potential success. The more time you have the better the potential for growth and ultimately more savings in retirement.

Life insurance involves underwriting, so your medical history and overall health will be reviewed in qualifying and rating class. Age will factor based on actuarial tables. Lifestyle and activities you participate in will be considered. The younger and the healthier you are, the better in determining your rating class. It is important that you meet certain income suitability requirements. With a 5-year payment commitment, affordability will be a qualifying factor. In short you need to qualify both medically and financially.

**The Kai-Zen^® Strategy is dependent on the client making contributions for the first 5 years therefore not defaulting on the policy, which could result in policy lapse and surrender charges. The client will not have access to the policy, the cash values, the death benefits or the living benefits until the loan is repaid and the assignment is released. The lender has the right to discontinue funding new premiums, exit the market, or to demand loan repayment based on the terms and conditions signed by the Master Trust. See the Master Trust documents for additional information. There are some exceptions to this rule. Please consult a tax professional for advice concerning your individual situation.