Planning for retirement and maximizing their estate is a big financial priority for many clients. Whether it’s maximizing social security income or planning to retire completely from their own savings, people want to review their options and prepare to retire comfortably.
Life insurance can be straightforward, but there are many differences and nuances in the policies that you should pay attention to. At its core, life insurance is a product you purchase when you pay a regular premium and, upon your death, the company pays an agreed-upon sum to the beneficiary you designate.
Permanent life insurance policies, such as whole life insurance, can also serve as an investment tool. A portion of the money you pay into the whole life policy accumulates a “cash value.” This is a tax-sheltered investment account that not only allows you to leave money to your heirs, but is also something you can borrow against while alive.
During your productive years, your life insurance serves as a benefit to help your family recover in the event of your untimely death and replaces your income. Once you reach retirement age, you can access the policy’s cash value via tax-favored loans or withdrawals. While the returns on this may be lower than other investment strategies, it provides additional security that your income will be available when you need it and also gives you assurance that your family will be taken care of in the event something unexpected happens to you.
This option may not be the best fit for everyone as term life insurance offers lower fees while other investments can offer more returns. However, for someone with significant assets, it’s worth exploring all the options and diversifying your investments to allow you to leave a legacy for those you love. In addition to a maxed out 401(k) and IRA and Roth IRA accounts, considering life insurance allows you to cover issues such as estate taxes or provide liquidity for a business. Some actually prefer life insurance to the deferred income tax retirement plans because the value inside the policy may be withdrawn via a loan without income tax implications.
Whole life insurance policies are commonly used as wealth preservation tools rather than investment and savings for retirement. It can also be a way to diversify your retirement nest egg. Finding a honest and helpful financial advisor who can help you navigate your options will be key to making the best use of your resources.
At Virtus Law Firm, we can work with your financial planning expert to help you craft the perfect strategy for retirement and help you keep your estate organized. Contact us today by calling 612.888.1000 or emailing firstname.lastname@example.org to set up a consultation.