As a good guideline, always talk directly to a Registered Financial Consultant when planning any type of retirement strategy. Matthew Dixon is an experienced financial consultant providing consultations with people throughout Seneca, SC, on how to plan for their retirement effectively.
One of the underused considerations for building a retirement saving plan is to use life insurance strategically. As Matthew Dixon explains to his Seneca, SC, clients, the right type of life insurance can be an asset as part of your retirement plan.
The Cash Value Advantage
Choosing a permanent life policy, which is sometimes called a whole life insurance policy, can be an option for retirement if you are younger at the time of taking out the policy.
As you pay into the policy, it will accrue a cash value. The longer you pay into the policy, the higher the cash value. In retirement, the cash value can be withdrawn from the policy over time. As a general guideline, as long as the amount you withdraw does not exceed the amount paid in premiums, there are no taxes on the amount withdrawn.
It is also possible to borrow from the cash value of a permanent life insurance policy. However, as Matthew Dixon will explain based on your policy, this loan to yourself will be deducted by the insurance company from the payout upon your death.
Life insurance is often important as a legacy for beneficiaries. However, it can also be a way to partially fund a retirement account. Before doing anything, be sure you understand the pros and cons of the decision.