Life Insurance is probably the most misunderstood product on the market today. Even though it has been around for over 150 years most people are ignorant as to what it can accomplish in their life and retirement planning.
Where Life Insurance can be used
- Provide assets to heirs that you have not had time to accumulate, , tax-free
- Fund College education, tax-advantaged
- Provide dollars for major purchases, tax-advantaged
- Provide Tax-Free Income for retirement
- Provide dollars to pay for funeral, final expenses and taxes, tax-advantaged
For Young People
Life insurance can provide tax-free dollars to pay off a mortgage, educate children and provide dollars to help a spouse transition to the next phase of life. Most times young people will opt for term insurance as the price makes it more affordable at this time of life.
Buying a permanent life insurance policy at a young age can be an excellent way to accumulate dollars in a tax favored environment. These tax-advantaged dollars can be used instead of borrowing from other sources. Once you have paid yourself back, these dollars will continue to be available to create a tax-free retirement income that can last your entire life (assuming you set it up correctly).
According to the 2016 Insurance Barometer Study by LIMRA
With an impending retirement income crisis, it’s encouraging that a common goal of life insurance ownership is
retirement income support. Though most say retirement support is a minor goal of their policy, 57 percent of
Millennials say it’s a major goal
Where Do You Begin?
What Products Do You Use?
What Can You Expect as Returns and Benefits?
For Middle Age People
As people move into middle age they generally enter their best earning years and are able to free up dollars for additional retirement savings. Unfortunately, most people are still putting these dollars into tax-deferred savings accounts where they are postponing the taxes into the future. If you feel that taxes are likely to go up in the future it would make better sense to pay the taxes today and put those dollars into a vehicle that can give you tax-free income in the future. Life insurance is one of the only places you can accumulate retirement funds in a tax favored environment and take the income out tax-free in the future. There are no restrictions as to how much money you can save, no taxes if you take it out before 59 1/2 and no Required Distributions at age 70 1/2.
For Business Owners
Even If you think you have no need for life insurance in retirement you should consider the uses that it has in estate planning. If you would like to pass on assets to your heirs it makes sense to consider leveraging those assets using life insurance. If you have assets that are already earmarked for your children or charities you can leverage the value of those assets by purchasing a single premium life insurance policy. The underwriting for this policy is less stringent than for a premium paying policy and depending on your age you may be able to increase the value of your asset by one to three times and leave it to your heirs 100% tax-free.
Another way you can leverage and transfer assets to your children and grandchildren is by funding a life insurance policy using as the insured while you remain the owner of the policy. This will increase the cash value of the policy faster as the mortality costs inside the policy will be lower due to the younger ages of your children. The cash value will be available to you during your lifetime and then be available to your children and grandchildren after you pass.