How Life Insurance Fits Into Your Retirement Plan
When you read an article about retirement planning, you expect to see terms such as IRA, 401(k), bonds, CDs and so on. What you might not expect to see is information about life insurance.
Life Insurance for Postretirement Income
When you purchase a permanent or whole life insurance policy, a portion of your premium is put toward the accrual of cash values. Depending on the type of policy you choose and the growth of the cash values, you may begin to take loans from the cash values upon retirement—sometimes you can even do so before retirement. Not only are these loans tax-free but to pay them back, you simply repay your own policy.
Loans from life insurance cash values can make up for troubling deficits in retirement savings and can help you avoid liquidating retirement assets during a down market year. These loans will reduce your death benefit if they aren’t paid back before you pass away, however, so they may not be the right option for everyone.
Life Insurance to Protect Your Estate
Once we’ve reached the end of our working lives, it’s not unusual to look at the amount of money we’ve saved and think about how much we can leave for our children and grandchildren. But when the money you’ve saved is in retirement accounts that you need to access in order to pay for living expenses throughout your retirement, you may feel insecure about what will be left for your estate. Rather than feeling pressured to underspend during your retirement so that there is still something set aside for your loved ones, you can secure a life insurance policy and allow the death benefit to serve as your legacy. Since we don’t know what the future of estate taxes will look like, a life insurance policy can also serve as added protection against the taxation of your assets after you pass on.
There are many ways a life insurance policy can reduce the amount of stress and financial pressure you face as you age. Even better, taking out a policy now while you’re still young and healthy means locking in lower rates for life.