More Than One Way To Invest For Retirement
If you are looking for all possible ways to accumulate money for your retirement, here’s your answer. One, contribute to your retirement plans. Two, buy a life insurance policy. Sounds simple enough.
#1 – Retirement Plans
Contributing to a qualified retirement plan such as a 401k, 403b or Individual Retirement Plan is standard for most investors. Many employers offer a retirement plan. If your employer does not you always have the option of investing in an IRA.
#2 – Life Insurance
Due to a common misunderstanding, life insurance is often overlooked by investors as a retirement investment. You should learn more before coming to that conclusion.
Many people believe that life insurance only pays out a death benefit. That would be correct with a term life insurance policy. A term life policy does not accumulate cash value, it only pays out a death benefit to your beneficiaries upon your death.
This type of life insurance policy is used for a specific reason and once the term is up the policy ends.
Young parents buy term insurance to pay off the mortgage just in case they should die while their children are young. If something were to happen to them they would not want their family to lose their home. This death benefit is paid out income tax-free.
Building Cash Value For Retirement
In addition to paying out a death benefit, a cash value life insurance policy also offers a “living benefit”.
The living benefit is the accumulation of money in the policy. This money grows on a tax-deferred basis. At retirement you have access to that cash balance, income tax-free. You do not have to die to take advantage of a cash value life insurance policy.
When Should You Use Life Insurance For Retirement?
If you have maxed-out your retirement plan at work and make too much money to contribute to a Roth IRA, a cash value life policy may be the way for you to accumulate additional money for retirement.
If you are concerned about leaving an inheritance but worried about long-term care needs, you can add a rider to a cash value life insurance policy. This rider option is not available with 401k’s, 403b’s or IRA’s.
Watch The Fees
Both retirement plans and life insurance policies will charge fees. With life insurance you could be charged fees for riders, the cost of insurance and the administrative charges.
Rider Fees Are Worth It
Some of the more common riders offered are worth the extra money.
- Accelerated Death Benefit Rider: you receive the death benefit early if you are diagnosed with a terminal illness.
- Accidental Death Benefit Rider: your beneficiaries receive additional coverage if your death is due to an accident.
- Premium Waiver Rider: if you become disabled your premium payments are waived.
Cash value life insurance is gaining in popularity as a way to invest for retirement. Before you come to any conclusions, check it out, get a quote. You may be surprised.