Many people only view life insurance as a way to
take care of final expenses. While that is an important component, life
insurance for retirement can also offer major advantages when it comes to
planning out your Golden Years.
Two life insurance products used in retirement planning are
permanent life insurance (coverage that’s in place your entire life that may
build cash value) and annuities (a safe investment alternative that includes
guaranteed interest rates, tax deferral and an option to have guaranteed income
for life).
Even if you have options through your workplace, there are
some definite advantages to permanent life insurance and annuities.
Advantage 1: Tax-free death benefit. While
401(k)s and traditional IRAs provide great incentives to save money, their
benefits are taxable. This applies even after death—and estate settlement fees
and probate fees can eat away at assets you earmarked for your loved ones.
Life insurance death benefits pass on totally tax-free.
Meanwhile, interest and cash accumulations generated from a permanent life
insurance policy or annuity are tax-deferred. (This means you can generally
postpone paying taxes on the interest until you use the money.)
Advantage 2: Liquidity. Typically, you’re
subject to an early withdrawal penalty if you use money from your 401(k) or IRA
before age 59 ½. In contrast, you can typically borrow against the cash value
of your permanent life insurance policy or annuity without facing a penalty.
Advantage 3: Flexibility. Traditional IRAs, Roth
IRAs and 401(k) have annual deposit limits that restrict how much you can
contribute each year. IRAs also have income restrictions. Permanent Retirement
Pension Plan life policies and annuities can be structured to allow
you to deposit as much money as you want, regardless of your income.
Advantage 4: Affordability. It is estimated that
58 million Americans are uninsured or underinsured when it comes to life
insurance. Many forgo coverage because they overestimate the price by as much
as 300 percent. Life insurance policies come in a wide range of prices to fit
any person’s budget.
Advantage 5: Security. In addition to a tax-free
guaranteed death benefit, permanent life insurance can also offer a guaranteed
cash value. Annuities, which can offer a guaranteed payout for as long as you
live, also offer a high degree of security.
Does life insurance for retirement sound like something you
could benefit from? If so, contact an insurance professional like an Erie
Insurance Agent to learn more.
[Source: https://www.erieinsurance.com/blog/2014/life-insurance-for-retirement]
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