Did you get a refund on your income tax this year? If so, good work! If not, you know how painful it is to write that check to the Internal Revenue Service.
Now imagine how it'll feel to pay income tax on the money you pull out of your retirement account. Remember, most traditional retirement accounts such as a 401(k) or IRA are funded with pre-tax dollars. That means you'll have to pay income tax when you start receiving distributions from that account.
But what if there was a different way to help fund your retirement...one that didn't result in more tax?
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Life Insurance and Tax-Free Retirement Income
Permanent life insurance offers a tax-free way to supplement your retirement. Permanent policies build cash value over time. A percentage of every premium payment you make goes into the policy's cash value account. Over time, that can add up to tens of thousands of dollars. You can then take policy loans or withdrawals to access that cash during your retirement, all 100% income-tax free.
But how does all that money get there in the first place? It needs time to grow, which is why it's good to buy this type of policy when you're still quite a ways from retirement.
With an indexed universal life policy (IUL), you have a chance to maximize the cash value your policy earns. Depending on your insurer, you can choose to tie your earnings to one or more market indexes (such as the S&P 500). If that index does well, you earn even more interest. If it doesn't do well, you don't lose a thing. If that sounds good, take a look at more benefits in the list below.
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What You Get with Indexed Universal Life
Supplemental retirement income is only one reason to choose indexed universal life. As with all life insurance purchases, the number one reason to buy is to give your family the protection of a death benefit. But this type of policy can do so much more.
Here are some of the additional benefits of indexed universal life:
- No set premiums or payment due dates
- Fund your policy with an initial premium, and pay only when the account needs money to remain in force
- Guaranteed death benefit (as long as you keep the policy current)
- Ability to adjust the death benefit amount
- Cash value growth over time
- Variety of crediting strategies to grow your cash value
- Guaranteed minimum interest rates (available through some insurers)
- Access to your cash value through policy loans and withdrawals
- Living benefits riders available from most carriers—use your death benefit to help pay for medical care if you're diagnosed with a qualifying chronic or terminal illness
I work with more than 40 insurers, and I can help you get a policy with the benefits that work best for you. From guaranteed minimum interest to riders that help pay for long-term care, an IUL policy can help give you a more secure retirement.
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