Permanent life insurance is one of the best retirement planning tools out there. So why doesn't everyone know about it?
Because it's more common to put all your financial eggs in one basket—usually the stock market, bonds, mutual funds, or a combination of these. But what if your IRA or 401(k) isn't getting the job done? Adding permanent life insurance to your retirement plan can help fill the gaps where traditional retirement plans are lacking.
- Your family is protected. As soon as your policy is in force, your family is protected by the policy's death benefit. So many people get wrapped up in planning for retirement and forget to plan for the here and now. What happens if you don't make it to retirement? Could your family still afford to pay the bills and send the kids to college? If your answer is "no," life insurance solves that problem.
- No term to expire. That's one key benefit of permanent polices, as opposed to term. Your family is protected beyond your working years, on into retirement. As long as you keep your policy paid up, your family is guaranteed a death benefit when you pass away. Many of my clients use this as a way to leave an inheritance for their children, allowing them to spend more of the cash accumulated in traditional retirement accounts.
- Flexible payment options. Depending on which type of permanent life insurance you choose, you can get payment schedules that work for you. Pay more when you can afford it, and less when you can't. Two specific policy types that offer this benefit are universal and indexed universal policies.
- Tax-free distributions. When your policy has accumulated cash value, you can withdraw that value using loans and withdrawals, 100% tax free, up to the value of premiums you've already paid.
- No early-access penalties. Unlike a 401(k) or IRA, you can access your policy's cash value at any age, without an early-withdrawal penalty.
- No required minimum distributions. Also unlike a 401(k) or IRA, you aren't forced to take withdrawals or loans from your cash value if you don't want to.
- Tap into the death benefit to pay for health care. If you're diagnosed with a chronic or terminal illness, many policies will allow you to dip into your death benefit to help pay for your medical care.
There are so many benefits a life insurance policy can provide. As an example, check out the video below. You'll meet a real-life family who used life insurance in combination with disability benefits to make it through a tough time.