Learn more about Kai-Zen Supplemental Executive Benefits

A Novel Way to Think About Retirement

Very rarely do people buy a house with a 100% down--usually, the purchase of a residence is financed. Often because of financing, a person's primary residence is their most significant asset at retirement. What if there were a way to similarly finance the accumulation of your nest egg for your retirement?

Several strategies have changed the way attorneys, owners, executives, professionals, doctors, businesses, and similar "key" employees plan for their future retirement benefits.

Investing in high-cash-value insurance creates both a death benefit for heirs and a tax-free pool of money. Most major corporations commonly use this strategy to fund Executive benefit arrangements.

Unlike standard executive benefit plans funded with insurance, one method in particular, Kai-Zen®, has an extra element. It is bank financed: the insured contributes to the program for five years while a bank matches those contributions. During the next five years, the bank pays both halves, financing 60-75% of all contributions.

Just like with a personal residence, when the loan is eventually paid off from the accrued accumulations, the cash account continues to grow utilizing a rather conservative risk spread between the bank rate and the crediting rates on the contract. The policy at retirement has a cash value based on this leveraged environment that could create a stream of income well over traditional planning techniques. Based on historical testing, the incremental benefit would be 60% larger compared to self-funding using the same assumptions.

 This income stream can be used to fund the common wants and needs of retirement:

Supplemental cash,

Tax-deferred growth of cash,

A way to get tax-free income from a policy's cash value,

Money for a chronic disability,

Money for a terminal illness,

  • Money for a chronic illness or a long-term care need
  • The tax-free death benefit to heirs.

Alternatively, the cash flow could be used by business owners for a:

· Living buy/sell,

· Living key man, and

· Living partner buyout.

Since the policy is collateral for the loan, Kai-Zen® requires no loan documents.

Here is a bit of technical stuff, a brief explanation of the "engine" of this strategy, and the Δ that makes it all work.




The historical LIBOR from 1930 to 2014(actual and hypothetical, as did not exist until January 1, 1986) is 6.35%, including the 1.75 margin.  The average crediting rate for Index Universal Life (SP500 point-to-point, also largely hypothetical since the current generation IUL did not exist until 1997) was 9.34%. However, that's 84 years. Here is the link to an interactive chart showing the history of LIBOR since 1998 https://fred.stlouisfed.org/series/USD12MD156N From the chart, you can see that the average was about 3%. For the same period, the Index Account averaged 7.09%. The illustrations are at less than 6.0%.

We cannot illustrate a higher rate, nor should we.

For your strategy to work, we need an average spread of about 1.25-1.5% between the AVERAGE policy crediting rate and the AVERAGE loan rate.

If interest rates go up, they can only go up as a result of increased economic activity; nothing else is so positively correlated with interest rate increases. In simple terms, if in the next 15 years, the average LIBOR (or whatever its equivalent might be) will be 7%, you will likely live in the Golden Age of 10% SP500 Index or the average SP500 over 14%.