Using Life Insurance For Retirement Purposes

 David Kleinhandler , Forbes Councils

When people hear the words “life insurance,” they immediately turn away from even discussing the matter. But what they may not understand is that it’s an asset — there to provide a stream of cash to help fund retirement tax-free and to pay for long-term care if you become ill.

The one fear we all have when getting close to retirement, even with all our planning, is whether we’ll have enough to last us through it. When doing your planning for retirement, you need to accept the reality that you could be retired for a long time and, if married, your savings may need to last for two lives — not just one.

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As you prepare for retirement, the money you are saving should be considered “safe money,” or funds you put away in secure conservative investments that will protect you from stock market volatility. What if you could invest and put the risk on the carrier and have downside protection? There are certain rules that will allow you to maximize the cash accumulation in your policy by following the 7702 guidelines, essentially funding to the maximum allowed under these guidelines. It’s basically creating a safe harbor without creating any penalties. Only an astute life insurance professional would know how to position these types of features correctly.

As you are contemplating retirement, it’s a common exercise to simplify your life by eliminating some of the things you no longer need. For example, you can eliminate monthly commuting costs and stop making contributions to the company 401(k) plan. If your kids are all grown and you’re on the verge of becoming an empty-nester, take a look at your home expenses and begin to think about a less expensive alternative. You may even consider canceling some or all of your life insurance policies. This is where you need to stop and realize exactly how the policies you currently own may have some value in your retirement.

As the nest begins to empty out, the need for life insurance begins to diminish. When you originally purchased your policy, you were probably looking at it as an income replacement tool to protect your family in case something happened to you and your income was lost. But, it is unrealistic to think that you may not still need that protection in retirement. Many retirees decide to re-enter the workforce for a variety of different reasons: to keep busy, for social interaction and to supplement their incomes. If that supplemental income is important to your retirement, your policy can continue to provide the same protection to your spouse during this period.

Your policy can also replace any income derived from your pension benefits, which may be either significantly reduced or eliminated entirely upon your death. The same holds true for social security benefits. When you pass away, your surviving spouse will only continue to receive the highest of the two benefits. The lower one will cease to exist.

In addition to income replacement, there are several other ways those policies you purchased can be beneficial to your retirement:

• Tax-Deferred Growth: If you purchased a permanent insurance product (whole life), then you’ve been building up cash for the entire time you’ve had it, and it has been growing on a tax-deferred basis. The dividends earned are considered a return of the premiums you’ve paid and are only taxable if the dividends exceed the premiums paid. You will not be required to pay any taxes until the policy is surrendered.

Read More: https://www.forbes.com/sites/forbesfinancecouncil/2018/03/06/using-life-insurance-for-retirement-purposes/#7663861c57f0

from Best Insurance Quote https://www.bestinsurancequote.io/using-life-insurance-retirement-purposes/