A Better Way to Help Clients Spend, Pay Down, and Use Their Wealth with Confidence
Most typical financial plans are built to answer one question: “Will I run out of money?”
It’s important—yet it’s a question that only skims the surface. In our experience, clients want more from their finances than to just skate by. Having enough money isn’t the pinnacle, it’s actually the baseline.
What clients really want to know is:
- Can I retire and enjoy it?
- Can I use my money now?
- Can I make a big decision without regret?
In other words, they’re looking for permission to spend. And yet, during the distribution phase of life (what you might call retirement), every dollar counts, and spending can seem like a gamble. It’s especially true when you’re living off the interest of a volatile account (check out our last post on volatility buffers for a solution to that problem).
The solution is not to spend anyway and hope for the best. The solution is to have assets that provide a permission slip and a strategy for spending them down in the most optimal way.
Yes, you read that correctly. With this strategy, clients can spend down their other assets without fear, and without disinheriting their heirs.
The Gap in Typical Planning
Most typical financial planning tools project outcomes.
They show balances, averages, and hypothetical returns. They don’t show decisions.
They don’t answer:
- What happens if we spend more now?
- What happens if we pay something off early?
- What changes if we use principal instead of preserving it?
So even when the plan looks fine…clients hesitate. Not because they don’t have enough, but because they don’t have clarity.
Truth Concepts has the real-time computing power to show what happens in these micro-decisions and how they can affect a client’s entire financial life. So where other software only skims the surface and demonstrates pretty hypotheticals, Truth Concepts gets as deep into the details as you and your clients are willing to go.
What is “Permission to Spend”?
As an advisor, you might hear language like “Person A/Person B” demonstrations, which showcase how life insurance can make a portfolio go farther. We’ve often called this “Distribution A/Distribution B” to match our Distribution calculator. It’s also been called the Permission Slip concept.
Whatever you call it, the concept is quite simple: by adding one particular asset to a client’s portfolio, it gives the client permission to spend down assets that they would otherwise be unable to spend down.
This challenges one of the most common (and limiting) assumptions in financial planning: that principal should always remain untouched.
In many cases, that assumption leads to:
- Lower lifetime income
- Higher taxes
- Less flexibility
- Disinheriting heirs
- And unnecessary restraint
And yet, it goes against what most clients are trained to believe. How on earth would spending more money lead to greater financial stability?
Note: Permission to spend is not a license to spend. Practical wisdom still applies to clients on a fixed income. The real “magic” of Distribution B is that it turns burdensome assets into advantages. Without life insurance, spending down assets would be unthinkable. With insurance, there’s certainty.
How Life Insurance Changes the Equation
The hesitation to spend usually comes from two places. The first is: “How long do I need this money to last?”
The Distribution phase of life is an unknown amount of time, and retirees are playing a game of chance with the money they’ve got. Naturally, “living off the interest” of their stocks and bonds sounds like a winning strategy… until you factor in market volatility and taxes.
The second hesitation is often: “What about my family?”
Clients don’t want to enjoy their money today if it means leaving less behind. What seems like generosity is actually fear and scarcity.
This is where properly structured permanent life insurance plays a different role than most people expect. Not only does it improve all other assets, but it also makes new strategies possible (like reverse mortgages, annuities, etc.) without eroding the legacy goals. It turns scarcity into prosperity.
And when that fear is reduced…better decisions become possible.
Here’s how it works:
A Case Study for Person A/Person B in Distribution
This is where the Truth Concepts Distribution Calculator becomes critical.
Instead of guessing, you can show:
- Interest-only vs. structured paydown
- Different distribution strategies specific to your client’s assets
- The true impact of withdrawals on cash flow, taxes, and remaining assets
Now let’s make this real.
Interest Only Income vs. Intentional Paydown
Let’s look at a simplified—yet very common—scenario.
Client Profile
- Age: 70
- Retirement assets: roughly $4,000,000 (give or take, depending on whether he bought life insurance)
- Tax rate: 28% (blended)
- Desired income: $200,000
The typical advice?
“Only take what you need. Preserve the principal.”
Distribution Strategy A: Interest-Only Mindset
If the client without life insurance decides to live off his interest and he earns 5% each year, that’s a gross income of over $219,000. Yet taxes take a big toll, so the client’s net income is more like $173,000.
Unfortunately, because this is a market asset, 5% is a hope rather than a guarantee. If the return drops to, say, 3 percent, then his net income drops to just $106,000. His income is reduced by more than a third at no fault of the clients.
What happens:
- Income fluctuates on a whim and is unreliable
- Taxes erode the withdrawal, making it less impactful
- Account balance remains largely intact
- Client is always worried about what’s left and how long it will last, can’t enjoy life to the fullest when the paycheck is uncertain
Distribution Strategy B: Paydown Permission Approach
Now we model something different in the Distribution Calculator: systematically distribute the $4 million over 20 years.
This is not reckless spending. It’s intentional use.
What you’ll see is that even though the client starts with a little less money at age 70 (since he diverted some of his savings to whole life insurance along the way), his NET income is much higher, and even increasing year after year.
What changes:
- Client gets the income they actually wanted
- Money is used during their lifetime
- Tax drag is often reduced over time due to controlled distributions
And most importantly: the life insurance still has Cash Value AND a Death Benefit. This means that if the client passes away at any point, even after 90, when his stock account is at 0, he still leaves something to his loved ones and his estate. And if he lives to 90 and beyond, he’s still got his Cash Value to see him through.
The Power of Whole Life Insurance
As whole life-friendly advisors, it’s easy to sing the praises of Cash Value. After all, it’s money that you can leverage over and over again while you’re alive, and that is POWERFUL. And yet it’s the Death Benefit that makes this “Permission Slip” strategy work. That’s because the Death Benefit is the 100% guarantee that no matter what happens to your other assets, there is something that is going to pass to your heirs that is protected from taxes, creditors, probate, and more.
With the Death Benefit, clients can feel more comfortable spending down other assets. And in fact, in the order of operations, Cash Value should be the last resort for income. If the taxable account runs dry, the Death Benefit can support additional cash flow strategies like a reverse mortgage (properly guided by a professional), annuities, etc. The promise of the Death Benefit is the peace of mind that your client can use everything they’ve got and still leave a legacy.
What the Distribution Calculator Reveals
The Distribution calculator is a powerful tool, beyond even what we’ve discussed today. (You can see more in our FULL Paydown Permission White Paper). When advisors run the numbers for themselves in this demonstration, three things usually stand out:
1. Income Improves
Clients often can take more usable income than they thought, for longer than they expected.
2. Efficiency Improves
Taxes and timing can be managed more deliberately, especially when combined with a Volatility Buffer strategy.
3. Behavior Improves
Clients no longer make decisions out of fear or scarcity and instead get to enjoy their money and their time.
Call to Action for Advisors
Life insurance is the tool that creates opportunity and flexibility, and there is so much value over a lifetime of owning whole life insurance. This strategy is possible because the client in Distribution B bought life insurance while he was young. If your clients are nearing the Distribution phase, it could already be too late (though never say never).
Impressing upon clients the importance of whole life insurance is sometimes a big task. It’s not as flashy as stock accounts, and it goes against typical wisdom these days. And yet it’s so much more than “death insurance.”
If you want to elevate your planning conversations:
- Start modeling Permission to Spend
- Use the Truth Concepts Distribution Calculator to compare decisions
- Show clients what actually happens—not what might happen
Because the best advisors don’t just help clients grow wealth. They help clients gain the understanding to use it well—with clarity, confidence, and purpose.
