Four Ways to Use Life Insurance in Retirement Planning

Four Ways to Use Life Insurance in Retirement Planning

Life insurance policies exist in a goodly number of flavors to provide coverage for myriad life needs.

Some policies cover income loss if a person becomes incapacitated or dies during their working years. Other policies are aimed at meeting expenses during hopefully long years in retirement. Our linked article examines the latter issue and provides four useful strategies for consideration by both insurance agents and their clients.

Life insurance can be used to provide an income boost in retirement. Via a 1035 switch, a life policy can be transformed into an annuity that pays an income to the holder for life. This would be a sound strategy to follow if a substantial death benefit is no longer needed. Perhaps the children turned out better than expected and no longer need their parents’ largesse in order to prosper. Mom and dad would be better off spending their money on making their retirement years more comfortable.

The same goal can be achieved by cashing in a policy for its surrender value, or selling it outright. The funds can then be pocketed for immediate use. If the policy is sold on the secondary market, recent tax regime changes minimize the potential hit on capital gains.

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The second strategy is possible because most life insurance policies are so-called non-modified endowment contracts. Under law, this means you can withdraw funds from the policy’s cash value without paying additional income taxes. This is a good alternative when confronted by a sudden need for funds during a market downturn, when you don’t really want to sell off securities or other assets.

For more information, please read:
4 Ways To Maximize Life Insurance In Retirement Income Planning | Forbes


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