There are two major approaches to generating retirement income.
The first favors the use of guaranteed lifetime income to cover fixed living expenses, at a minimum. Annuities and bonds, for example, work well in this method.
The second approach focuses on designing investment portfolios that can produce sustainable withdrawals that have a high probability of lasting for the client's lifetime and perhaps leaving a legacy. These portfolios typically have diversified holdings with a sizable percentage in equities to provide growth. Both approaches can work, of course, and it's not always an either-or decision. Many advisors with whom I speak blend the two methods when doing so best fits the client's requirements.
Life insurance, either whole life or term, rarely figure into retirement income plans, however. While whole life policies can provide a living benefit through access to cash values, life insurance is still considered essentially an estate-planning tool.
A recent paper by Wade D. Pfau, Ph.D., CFA, "Optimizing Retirement Income by Combining Actuarial Science and Investments," explicitly considers a potential role in retirement income planning for term- and whole life. The paper, which was commissioned by OneAmerica®, examines three retirement plan scenarios: (1) investments and term life insurance; (2) investments, joint and 100 percent survivor annuity, and term life insurance; and (3) investments, single life annuity, and whole life insurance.
