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How Bank-leveraged Financing Can Close the Gap for High-income Earners Thumbnail

How Bank-leveraged Financing Can Close the Gap for High-income Earners

Retirement Funding

In life, you have to make sacrifices and compromises. Many people believe that if you want to finance a comfortable retirement, then you need to sacrifice everything right now. However, the future isn’t guaranteed. As important as it is to plan and save for your later years, you’re working hard for your money now. You deserve to enjoy it.

While it is important to prioritize your spending based on both long- and short-term goals, high-income earners should be aware of this strategy to close the gap. 

What is bank-leveraged financing?

Bank-leveraged financing is an index annuity leveraged through life insurance. Similar to how a mortgage allows you to borrow money from the bank to finance a larger house than you could buy outright, bank-leveraged financing borrows money now to provide increased benefits at retirement. Instead of trying to squeeze your budget to put every last penny into retirement savings, you can utilize borrowed funds.

Like using a mortgage to buy a house or a business loan to finance expansion, the decision to use leverage is driven by the concept that the money you contribute will grow faster than the cost of borrowing.

Who might use bank-leveraged financing?

Bank-leveraged financing may be beneficial for both individual retirement savers and their employers. For individuals, bank-leveraged financing helps protect against future loss of income. Have you ever considered what happens to your retirement plan if you take your future income out of the equation? For most individuals, their plans would be detrimentally impacted. It’s crucial to have a proactive strategy that protects your retirement benefits in the case of illness or injury.

If you fall ill or become injured in an accident and are no longer able to work, you will have a significant loss of retirement savings. Bank-leveraged financing acts similar to a life insurance policy in that it can kick-in and provide additional benefits if you’re no longer able to work.

Even if all goes to plan and you have no accidents or injuries, bank-leveraged financing can provide a significant benefit to individuals. Many families put less away for retirement because they’re worried they will need the liquidity in the event of an emergency. Current economic and global climates can exacerbate this. By keeping cash on hand you protect your family from unforeseen expenses, but you may miss out significantly on savings opportunities. Bank-leveraged financing allows you to do both.

Another reason individuals could utilize bank-leveraged financing is to make up a gap in their retirement savings. Many professionals significantly underestimate the income they’ll need for a comfortable lifestyle in retirement. While your spending may go down on work-related expenses like business clothing, your commute, and more, other expenses will rise, such as medical costs. Bank-leveraged financing helps many individuals make up the gap between what they’re saving now and what they’ll need for a comfortable retirement.

Organizations should also consider bank-leveraged financing for their retirement plans. Offering attractive retirement plans can be a strong tool for acquiring and retaining top talent. In fact, a study by Glassdoor found that 79% of employees would prefer additional benefits over a pay raise, with retirement, 401k, and pension plans landing in the top five desired benefits.

Bank-leveraged financing lets your organization provide increased benefits to your employees than without. This can also be an effective strategy for protecting key business leaders without monopolizing cashflow.

Could bank-leveraged financing take your retirement plans to the next level?

Are you worried your current plan won’t support your ideal retirement lifestyle? In the midst of the coronavirus pandemic, many individuals are turning to bank-leveraged financing to retain some liquidity in their budget for emergencies.

Want to learn more about how bank-leveraged financing can help you fund your retirement? Schedule time with our experts.


*Receipt of benefits depends on rider and meeting certain qualifications and varies by state. The use of one benefit may reduce or eliminate other policy and rider benefits. Payment of living benefits will reduce the cash value and death benefit. Substantial tax ramifications could result upon contract lapse or surrender.

Surrender charges may reduce the policy's cash value in early years. It is possible that coverage will expire when either no premiums are paid following the initial premium, or subsequent premiums are insufficient to continue coverage. The Tri-Zen Strategy is dependent on the employer making contributions for the first 5 years and not defaulting on the policy, which could result in policy lapse and surrender charges. The employee 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. Receipt of accelerated benefits may be taxable and may affect eligibility for public assistance programs. This information is not intended as tax advice. Please consult with your tax advisor regarding your own situation. Not all riders are available by all life insurance companies.

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