Why Integrating Insurance Into Retirement Planning Can Outperform Investments Alone

When most people think of retirement planning, they immediately picture stocks, bonds, and mutual funds. But a major study by Ernst & Young (EY) highlights something important: adding the right insurance products into a retirement strategy can actually improve outcomes — both in terms of retirement income and legacy for heirs.

EY is one of the “Big Four” global professional services firms, advising Fortune 500 companies, governments, and high-net-worth individuals in more than 150 countries. They bring deep expertise in tax, finance, and actuarial science — making their retirement research especially relevant for anyone serious about long-term planning.

How the Study Was Conducted

To compare strategies, EY used Monte Carlo simulations — a rigorous statistical method that models thousands of possible market scenarios. Instead of assuming steady returns, Monte Carlo testing stresses portfolios against the randomness of markets, interest rates, inflation, and taxes.

In other words: it’s not a “best case” or “average case” projection — it’s a probability-based analysis of how strategies hold up under both good and bad markets.

What EY Analyzed

The study compared five different retirement approaches for a hypothetical couple:

1. Investments only – a traditional portfolio of equities and bonds.
   
2. Buy term insurance + invest the rest – the conventional “cheap term and grow wealth elsewhere” approach.
   
3. Permanent Life Insurance (PLI) + investments – combining high cash value permanent life with traditional investments.
   
4. Deferred Income Annuity (DIA) with Increasing Income Provision (IIP) + investments – locking in future guaranteed income that adjusts upward over time.
   
5. PLI + DIA with IIP + investments – blending permanent life and income annuities with investments for diversification.
   

Key Insights from the Study

• Permanent life insurance plus investments produced stronger results than both the “investment-only” and “buy term and invest the difference” strategies. It improved retirement income and left more wealth at the end of life.
  
• Deferred income annuities with IIP created the highest retirement income stream, helping retirees secure lifetime cash flow, though the trade-off was leaving less behind for heirs.
  
• Combining PLI and DIA with investments provided the most balanced outcome, delivering both a reliable income stream and meaningful legacy protection.
  
• EY suggested that allocating up to 30% of annual savings toward permanent life insurance and up to 30% of assets at midlife (around age 55) toward a DIA with IIP can optimize results.
  

What This Means for Families and Business Owners

This research validates what many of us in the wealth strategy space already know: insurance is more than just protection — it’s a powerful financial tool.

• For those who prioritize income security in retirement, annuities with an increasing income rider are valuable.
  
• For those focused on leaving a legacy, permanent life insurance is the clear winner.
  
• And for those who want the best of both worlds, a thoughtful integration of both products with investments provides the strongest balance of certainty and flexibility.
  

Final Thoughts

Ernst & Young’s independent analysis confirms that an integrated strategy outperforms going it alone with investments. By combining guaranteed insurance products with traditional investments, families can position themselves for more predictable income, more certainty in retirement, and stronger outcomes for future generations.

If you would like to explore how an insurance product could enhance your savings and strengthen your retirement plan, contact Producers Wealth today.

Reference: “The Benefits of Integrating Insurance Products Into a Retirement Plan,” Ernst & Young LLP, 2024.

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