Having the resources to fund a comfortable retirement is an almost universal concern, especially among the large number of baby boomers who will retire over the next two decades. The regulations and limitations of qualified retirement plans and the uncertainty of Social Security make finding a supplemental source of retirement income important. The truths of retirement planning for the emerging affluent include:
- Most highly-paid individuals don’t qualify for Roth IRAs.
- The maximum contribution percentage allowed into 401(k) and other qualified plans are limited for highly-paid individuals.
- Social Security will not be enough to provide adequate income retirement in retirement.
- Aging trends demonstrate that life expectancy is increasing over the years along with the risk of outliving savings.
- Traditional retirement plans may not allow flexible access to money.
Retirement should be a time of enjoyment and security – not a time for worrying about outliving assets. By incorporating life insurance into a financial plan, individuals not only will have a valuable death benefit to pass on to future generations, but also another potential source of retirement income.
- Competitive Rate of Return – Properly funded and managed, a life insurance policy can provide a competitive rate of return compared to many other market options.
- Income-tax-free death benefit – Income-tax-free life insurance death proceeds can help your heirs and beneficiaries remain financially secure and can provide estate liquidity.
- Tax-deferred growth – No income tax is payable while money is accumulating inside the life insurance policy.
- Tax-free income – The owner of a life insurance policy can attain tax-free income through a combination of policy withdrawals and loans. Policy withdrawals and loans will reduce the policy cash value and may reduce the death benefit payable under the policy.
- Flexible contributions – Premiums can be designed to meet a person’s changing needs. After the first policy year, a policy owner has the option of changing both the timing and amount of premiums. The policy will continue inforce so long as the policy has sufficient cash value to support the monthly deductions.
- No distribution requirements or penalties – Distributions can occur before age 59 ½ without a premature distribution penalty, and there is no required minimum distribution at 70 ½.
- Complete control – The policy owner – not his or her employer and not the government – decides how and when money goes into or comes out of the policy.
- Income-tax-free distributions are achieved by withdrawing to cost basis (premiums paid) then using policy loans. Withdrawals will reduce the policy’s cash value and may reduce the policy’s death benefit. Policy loans will reduce the policy’s cash value and death benefit. Assumes policy qualifies as life insurance and does not lapse.