Executive Benefits Series — Reward & Retain Your Best People (Part 5)
Most bonuses are gone within weeks.
They’re spent, saved, or folded into other assets until the money blends into everything else. An Executive Bonus Plan is designed to be different, and by now that idea may already feel familiar.
But there’s a question that matters even more than how this benefit works today.
What does it do for the employee years from now?
That’s where an Executive Bonus Plan becomes something an ordinary bonus can never be. Depending on the policy design, ongoing performance, and proper management, it may provide life insurance protection, accumulate cash value, and later help supplement retirement income long after the bonus itself has been paid.
It Starts With Life Insurance
Every Executive Bonus Plan begins with life insurance.
That protection helps provide financial security for the employee’s family if the unexpected happens.
While many employee benefits end when employment ends, a personally owned life insurance policy generally remains with the employee, providing protection that may continue well beyond a career with a particular employer.
That foundation is what makes the benefit different from an ordinary cash bonus.
It May Build Cash Value Over Time
Depending on the policy’s design and ongoing performance, the policy may accumulate cash value over time.
Unlike a traditional bonus that is typically spent and forgotten, a properly managed policy may continue growing throughout the employee’s working years.
How much value ultimately accumulates depends on many factors, including policy design, premium funding, carrier performance, and how the policy is managed over time.
It May Help Supplement Retirement Income
One reason many employees appreciate an Executive Bonus Plan is that the policy may provide more than life insurance protection.
If sufficient cash value accumulates, a properly managed policy may later provide access to that value to help supplement retirement income.
For some employees, that creates an opportunity to receive a benefit from today’s bonus long after their working years have ended.
Any supplemental retirement income depends on policy performance and proper management and should never be assumed or guaranteed. Accessing policy values should always be discussed with your insurance professional.
The Protection Doesn’t Have to End
Even while a policy may later help supplement retirement income, it may continue providing life insurance protection for the employee’s beneficiaries.
That combination of living benefits and life insurance protection is one reason many employees view an Executive Bonus Plan differently than additional compensation alone.
The employer’s investment has the potential to create value throughout multiple stages of the employee’s financial life.
More Than a Bonus
A paycheck is temporary.
A thoughtfully designed Executive Bonus Plan may continue creating value for years to come.
For many employees, that is what makes the benefit meaningful.
It isn’t simply additional compensation.
It’s an employer investing in the employee’s future.
Explore the Executive Benefits Series
- The Employee You Can’t Afford to Lose (Part 1)
- A Bonus That Builds an Asset (Part 2)
- How an Executive Bonus Plan Works (Part 3)
- How a Restrictive Endorsement Agreement Works (Part 4)
- Turning Today’s Bonus Into Tomorrow’s Retirement Income (Part 5)
- Is an Executive Bonus Plan Right for Your Business? (Part 6)
Kurtz Lytle is the founder of IUL.Solutions, an independent insurance and retirement income practice based in Nashville, TN. All recommendations are made only after a full suitability review in accordance with each state’s insurance regulations. IUL.Solutions does not provide tax, legal, or investment advice. NPN #8993693.