When it comes to retirement, the prevailing sentiment on Wall Street is, “buy term and invest the difference.” In the 80s and 90s that was a very popular approach because the stock market did so well. But as we’ve seen over the last 12 years, that strategy can easily backfire when the market isn’t doing well. That’s why it makes a lot of sense for people during their working years to put money in cash value life insurance, either as an alternative to tax-deferred plans or as a supplement to them.

Yet it’s a strategy that not many people are made aware of. The average person I see in my practice is between 65 and 75 with probably 90% of their money in tax-deferred retirement instruments like 401(k)s or IRAs — and little to none in a tax-free instrument. As a result, they have few options when it comes time to withdraw that money in retirement. Taxes will reduce those withdrawals, especially if taxes go up. So it’s a huge advantage to be able to make a tax-free withdrawal, which can be done through a properly structured cash value life policy.

Another advantage of cash value life insurance plans is their flexibility. If clients put their money in 401(k)s and IRAs, for the most part they’re locking those funds away until they’re 59 ½. If they take it out early they get hit with a 10% penalty in addition to paying income taxes. By comparison, a cash value life insurance policy has no age restriction on withdrawals.

Best of all, most types of cash value life insurance are protected from the volatility of the market — and I don’t recommend those that aren’t, such as variable life insurance policies. Life insurance is meant to be something clients can depend on either because of the death benefit or the cash value. As an adviser, I don’t want to take risks with that portion of someone’s strategy.

During retirement years, there’s also a prevalent mentality that people don’t need life insurance because they’ll have enough assets by then that they’ll be essentially self-insured. It’s a nice theory, but real life typically doesn’t work out that way. Couples depend on both pension and social security, and when one spouse dies there’s a huge reduction in income to the household. Since cash value life insurance is permanent, this can provide tremendous peace of mind for retired couples to replace lost income.

When prospecting, I’ve found some clients are married to their Wall Street adviser. And yet, I’ve still been able to gain their business. They’ve kept their Wall Street adviser to handle their investments, but they hire me to show them strategies they’ve never been told about before. This is a competitive industry we’re in, and if you can show your clients something new, that expertise can help build your book of business.