As you get older, you’ll need to start planning for retirement. For most people, life insurance and retirement planning seem like two different things, leading many to wonder if life insurance can truly be part of a retirement plan. Generally, your retirement plans are for you, while life insurance generally benefits your dependents. However, it is possible to use life insurance as a way to plan for retirement.
How to Include Life Insurance in Your Retirement Plans
Of the different types of life insurance, permanent life insurance plans are more suited to be included in retirement plans as they can be used to supplement your retirement savings. Types of permanent life insurance plans include universal, variable, or whole life insurance, all of which have a cash value that accumulates apart from the death benefit.
One major advantage of permanent life insurance plans is that you can withdraw or borrow against the cash value. This can be used to pay your mortgage for a while, pay bills if you lose your job, or fund your retirement. However, withdrawals and loans from your permanent life insurance will reduce the death benefit amount until you repay them.
There are different potential uses for a permanent life insurance policy in retirement planning. First, it could provide funds to cover large expenses. Though the cash value of permanent life policies grows slowly during the early stages, later they grow enough to be used to cover expenses, such as medical bills or home repairs. You can also take loans from your cash value.
Life insurance plans provide an opportunity for tax-deferred cash value accumulation. This means policyholders will not owe taxes on the cash value. Your policy can complement other tax-deferred savings options like workplace retirement plans and IRAs.
During retirement, your life insurance plans can be used to pay off high-interest debt so that your dependents do not have to worry about it. Life insurance also helps to cover certain end-of-life expenses such as burial and funeral arrangements, thereby reducing the financial burden on your family. All these show that life insurance is a key part of retirement planning.
Call Us Today For More Information
Reach out to Innovative Senior Benefits today to learn more about permanent life insurance policies and how they can benefit you in your retirement years.