Most people see life insurance primarily as a way to protect a family from loss of income should a breadwinner die.
That income-replacement function doesn’t have to come to an end in retirement. Life insurance can be used to ensure there is enough money to compensate for income that goes missing when a spouse passes away during retirement.
Still, some of the best things about life insurance are the tax advantages.
Death benefits are typically paid income-tax-free to beneficiaries and may also be free from estate taxes. Benefits paid out before the insured’s death because of chronic or terminal illness also are tax-free. And cash values within a permanent life insurance policy can grow without being subject to income tax.
Of course, as with any investment, there are critics. Yet the critics’ opinions are too often based on misinformation or intended to steer people away from insurance and into other investment options instead. For instance, mutual funds have expense ratios as high as 1.5% to 2%. With the advisory fee added, many mutual fund investments could cost you 2.5% to 3% annually, not including additional transaction fees. The fees in properly structured life insurance contracts are generally higher in the earlier years and lower later on. Over the life of a program, with a properly structured life insurance contract, these fees can average as little as 1.5%.
For those readers who are retired – just because you aren’t working anymore doesn’t mean you don’t continue to have a need for the protections and benefits of life insurance. It should be approached as any other investment: first, determine your specific needs, find out what you can about the companies that offer insurance, and go to a recommended specialist who can walk you through the pros and cons of the different policies on offer.
For more information, please read:
Don’t Overlook Advantages of Making Insurance Part of Your Retirement Plan | Kiplinger