Creating the Need

The “Federal Retirement 80% Rule” (FR 80) is the cornerstone for creating the need for our proprietary Federal Employee “Encore” Roth IRA program. The basic premise is quite simple; for a federal employee  to have enough money to retire when they want to retire, and more importantly, stay retired without having to change their lifestyle or go back to work, their Gross Income on the day after they retire should be no less than 80% of what it was on the day before they retired.

While this might appear to be an easy goal to achieve, our FR 80 Calculator in most instances, will show a shortfall of anywhere from 25% to 33%, thus the need for the federal employee to supplement their retirement income and what better way than with a Roth IRA where the money is withdrawn on a Tax-Free Basis!

All Encore sales that are made start with our FR 80 Calculator. Once the Retirement Income Shortfall is established, the Encore Roth IRA becomes the solution. One other thing to be aware of is that FEGLI (Federal Employee Group Life Insurance) is very expensive and the life insurance component of the Encore Roth IRA helps to reduce the need for some, of their expensive FEGLI coverage.

Encore Plan Setup

The Encore plan premium modifies after the first year.  We encourage our advisors to set up the plan using the 50% Modified Life Insurance, 50% FPDA model  in the first year.   After the  first year, the plan will automatically convert to 25% Modified Life Insurance and 75% FPDA. The Hypothetical Case Studies on this website are predicated on this model.

When you set up an Encore Roth plan for your client, remember that  the maximum annual premium that can go towards the FPDA portion is $4,000  a 50%/50% split in the first year would essentially max out the FPDA after the second year.

Where does the product fit?

  • The plan is used as a supplemental retirement vehicle.
    • Tax free cash value in life insurance
    • Tax free cash value in FPDA if classified as a Roth IRA
    • Tax free death benefits from life insurance and FPDA (Roth IRA)
    • Roth IRA balance can be turned into a lifetime stream or moved to a FIA in retirement.
  • This is an opportunity for a federal employee to add a fourth income check to their retirement income stream.
    1. FERS Pension
    2. Social Security
    3. TSP Related Revevue
    4. FERS Supplement
    5. Encore Income