Life Insurance For Retirement Savings
You probably have a basic understanding of what life insurance is for.
It helps provide for your loved ones when you’re no longer here. But life insurance actually provides more than just a death benefit. Actually, an indexed universal life insurance policy (or an IUL policy) can be utilized as a way to gain tax-free* income. It can also provide some retirees with a way to keep their assets secure, while still receiving a reasonable rate of return over time. While IUL policies aren’t for everyone, they’re certainly a strategy to use life insurance for retirement that you can examine.
Another reason some retirees consider an IUL is the potential for growth. They’re often a better option for a place to keep your money than placing it in a market or in a low-interest CD.
Retirees can also use them for potential death benefits. For example, any money left to your beneficiaries is tax-free* for the recipient. This is because your money isn’t paid out to them from an investment account. Instead, it’s from the cash value of an insurance policy. Also, with an IUL, your beneficiaries won’t have to go through a probate to gain access to these funds.
At Safe Harbor, we know that everyone’s situation is different. It’s possible that life insurance and retirement annuities could be part of a strategy that’s right for you. Reach out to our team to learn more.
How To Use
Life Insurance For Retirement Income
An indexed universal life insurance policy offers tax advantages with potential for tax-free* income. It’s important to remember that it’s an insurance product. The premium has a different set of rules than the money you invest in the stock market because it’s an insurance product.
For example, if you already have retirement accounts like a Roth IRA or a 401(K), you pay taxes on withdrawals. You’re actually required to withdraw funds and pay the taxes on them once you reach a certain age. This is called required minimum distribution. If you’re searching for a way to convert this money into tax-free* money, you may consider an IUL. Some retirees choose to convert some of their retirement income slowly into an IUL, so they’ll be able to withdraw the money from it without paying the income tax on those funds.
Retirees that use an IUL as part of their retirement strategy may receive many benefits. Many of these benefits can help you during your retirement years. For example:
- You can protect your cash value using an IUL, even when the market is down
- A stock market index provides you with a potential for cash value growth
- Potential tax-free* income
- You may be able to choose the number of indexes you want for your IUL
- You may be able to lock in potential gains
- Principal and interest are available tax-free*
- Flexibility to fund all at once or slowly over time
- No excess fees for taking money out before the age of 59 1/2
Additionally, some IUL’s offer some unique benefits in regards to your legacy. Benefits for your death beneficiaries include:
- The death benefit may be higher than the premium payments that you make
- The death benefit is tax-free*
- The benefit can be paid overtime, or as a lump sum
- There’s no probate court, instead the money goes directly to the person you’ve designated
- A potential option for using some of the death benefits for chronic or terminal illness
- The death benefit can increase over time
Finding the Right Life Insurance For You
It doesn’t matter whether you’re currently in retirement or are drawing close to retirement age. As we near retirement, our needs change. And that means that our investments change, too. Typically, retirees want more secure, risk-free alternatives for their money. Usually, this change applies to life insurance as well. During your working years, you might’ve had an insurance policy to provide for your family once you passed. Now that you’ve built up savings for retirement, this might be a secondary goal.
Maintaining protection for your family is still important, of course. But retirement introduces additional challenges that could impact which goals you prioritize. The type of life insurance policies that you choose is just as important as ever.
Safe Harbor values the safety of our clients and their hard-earned money.
We can help you learn how to preserve it and have an income for life. Please join us at a seminar or call us to schedule an appointment today.