Financial independence - you can achieve it as long as you plan correctly. Whether you started young or are already pushing retirement age and wondering where the time went, I can help you figure out where you want to be and what you need to do to get there.
The steps laid out below are basic ones that work for everyone, whether you're single, married, divorced, widowed, with kids, or without kids. These are specific financial products designed to help you achieve more than one goal at a time. When it comes to saving for retirement, multi-tasking is a great strategy!
Step 1: Supplement your retirement with permanent life insurance.
Few, if any, financial products are built to handle more than one need. Permanent life insurance is a great exception. It can address three separate goals at once: wealth protection, wealth accumulation, and wealth transfer. Here are a few ways permanent life insurance helps you do this:
- Tax-deferred cash accumulation
- Tax-free access to cash during your retirement
- Fewer penalties for accessing cash value before retirement age than traditional retirement accounts
- Income-tax-free death benefit for your heirs
- Bigger death benefit if you do not use your cash value during your lifetime
- Usually non-accessible by creditors or litigators
There are several varieties of permanent life insurance, but one that's particularly well suited to growing your money is indexed universal life. It helps you build even more cash value when the market is doing well, but you don't lose anything when the market's not doing so well.
Step 2: Turn your pension or 401(k) into guaranteed income for life.
This option works particularly well if you have a lump-sum payout of an existing pension or a 401(k). You can use that money to buy an annuity. An annuity will pay that money back to you in equal installments, every month for the rest of your life. It removes the burden from you in terms of budgeting and making sure enough of that pension payout is left to support you as you age. People are living much longer than they used to, and an annuity can help take some of the worry out of outliving your savings.
Step 3: Use life insurance as part of your estate plan.
If you plan on leaving money to your children or other heirs, you're probably aware that they may face the dreaded estate tax. To reduce the overall value of your estate and potentially pass more money to them tax-free, use life insurance in your estate plan. When set up properly in a trust, life insurance can help you leave the most behind for the ones you love. Unlike IRAs, there is virtually no limit to the amount of money you can use to fund your life insurance policy. You can sock away money that will be transferred to your heirs tax-free without going through probate.
Step 4:Use life insurance to fund long-term care and plan for disability.
Riders are add-ons to your policy that offer even more benefits than the standard policy terms. For example, you can add a "waiver of premium" rider. This means that if you become disabled and can't pay your premium, your insurance company will pay them for you while you're unable to work. You won't lose your policy because you were disabled. During that time, your insurer is actually funding your retirement! There are also riders that will pay a monthly benefit if you need long-term care. In fact, it's often easier and cheaper to add this rider to your life insurance policy than it is to buy a separate long-term care policy.
Of course, the biggest benefit of any life insurance policy is the financial security and peace of mind it brings your loved ones. It's important not to forget that, even as we look at some of the other ways life insurance can help bring you financial independence.