Holistic Retirement Planning: Enhancing Outcomes with Insurance Products

Retirement portfolios integrating life and annuity products can outperform investment-only plans, showing the benefits of holistic planning.

In brief

• The insurance industry faces a $400 trillion global retirement savings gap and a daunting protection gap by 2050, offering growth opportunities for insurers.
• Holistically planning broadly across the needs and risks facing consumers is essential to improving outcomes and can reduce savings and protection gaps.

The US life insurance and retirement industry holds significant potential for growth despite having to navigate various macroeconomic, economic and social challenges. Insurers are uniquely positioned to address the growing retirement savings and protection gaps with products that offer legacy protection, tax-deferred savings growth and guaranteed income for life.

Impacts and potential of including insurance products in retirement planning

This article is a continuation in a series analyzing the impacts and potential benefits of including insurance products in retirement planning to help meet the savings and protection needs of consumers. For 2025, we used indexed universal life (IUL) as the life insurance vehicle and a fixed index annuity (FIA) as a representative annuity. These products represent a growing proportion of the insurance product market with record sales of approximately $3.8 billion and $125 billion for IUL and FIA, respectively, reflecting increases of 4% and 31%, respectively, over the previous year. These products are popular in today’s market, allowing an investor to take on equity exposure through indexing mechanisms and providing increased upside return potential with principal protection, i.e., no downside risk. Additionally, they allow for flexibility in the ability to customize premium payments, death benefits and other various provisions, while retaining the tax benefits and life and income protections of other insurance products.

We will also examine Social Security (SS) income, a crucial element in comprehensive retirement planning. In our SS analysis, we explore various strategies to mitigate the impact of a hypothetical reduction in future SS income, such as a 50% decrease in benefits. 

Six retirement investment strategies compared

To compare our strategies, we employ a Monte Carlo analysis to generate 1,000 scenarios, each containing a time series of interest rates, inflation rates, equity returns and bond returns over the planning horizon. We then evaluate two outcome metrics derived from these simulations, i.e., the after-tax retirement income that can be sustained at a 90% probability of success and the median legacy value remaining at the end of the time horizon. Strategies are as follows:

Key benefits of integrating insurance products into retirement plans for investors

Our analysis reveals six key benefits of integrating insurance products into retirement plans. By blending solutions such as indexed universal life (IUL) and fixed index annuities (FIA) with traditional investment strategies, investors can achieve greater income security, enhanced protection against market downturns, and increased flexibility in meeting their retirement objectives. For a comprehensive analysis, including detailed case studies and specific outcome metrics, view the full report.

1. IUL combined with investment strategies outperforms the investment-only strategy for the given metrics.
2. Integrating FIA with investment strategies significantly outperforms the investment-only strategy in generating retirement income, with an associated small reduction to the legacy values.
3. Integrated strategies are more efficient than the investment-only strategy.
4. Strategies that are integrated offer investors the flexibility to prioritize their financial goals, whether it be maximizing their retirement income, preserving a legacy or finding a balance between the two.
5. For investors with a higher risk appetite, integrated strategies remain better.
6. Insurance products can be used to mitigate risks beyond adverse market performance.

Ernst & Young LLP Manager Steve Parry and Ernst & Young LLP Managing Director Ben Yahr contributed to this article.