For many people, life insurance isn’t bought with the intention of planning their own future, but the future of their beneficiaries. But life insurance can actually be a really helpful way for you to plan out your own financial future—if you know what you’re doing.
Life Insurance and Retirement Income
There are a couple of ways that a life insurance policy can result in future retirement income. The first is when you tap into the cash values for the occasional tax-free loan. This is a great way to supplement your retirement income, avoid sequence of returns risk during a down market, and get a temporary boost to pay for emergencies.
The second way a life insurance policy can create future retirement income is through a 1035 exchange. A 1035 exchange is a tax-free conversion that transfers the cash value of one life insurance policy to another—or to an annuity. Through this new annuity you can create an ongoing, lifetime, predictable income. If your insurance policy has underperformed and shows an investment loss, the 1035 exchange can even offset future annuity gains.
Long-Term Care and Accelerated Benefits
It’s no secret that as we age, our health and physical capabilities diminish. No matter how in-shape you are, you won’t be the same physically at 80 as you were at 30. Eventually, that means you may need long-term care assistance that isn’t covered by Medicare. A life insurance policy with long-term care benefits will provide for long-term care benefits out of the death benefit, with the remainder going to beneficiaries.
Unfortunately, terminal illness diagnoses are not unusual at advanced ages. A life insurance policy with an accelerated benefits rider can advance a large percentage of the death benefit to you if you are diagnosed with a terminal illness, which can help you pay for care, treatment and get your finances settled.
Life insurance isn’t just for your beneficiaries; it’s a valuable tool in your overall portfolio that helps enhance your future.
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