Life Insurance VS A Retirement Policy
Post date: March 22nd, 2010 |
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Many people find out at retirement that they have not enough money to live the lifestyle they are used to. There are too many people in this country that have no retirement benefits and will be living on social security benefits alone. For someone living on social security benefits their lifestyle will change dramatically and they will find that they may not have enough money to keep their home and retirement becomes a burden rather than a joy.
When you hear about a life insurance policy you automatically assume it is only to be used for death benefits. The fact is that many life insurance policy pay out retirement benefits that are tax free. You can find the policy with mutual funds, stocks or bonds, and even with cash from your bank account.
Having the security of death benefits for your family is very important but having peace of mind about your financial well being after retirement is a huge concern for most people. The life insurance policies can be created to offer payouts over a specified period of time or can be paid for your entire lifetime. The best feature of the policies is that you put in it what you want to invest in your future and the payments will not be considered taxable income.
Retirement benefits can be utilized in many ways with the life insurance policies. You can borrow from cash values or have a payment plan designed to meet your needs. In both instances there will be certain pros and cons.
Money that is accumulated in a life insurance retirement policy will be able to be withdrawn at retirement age without paying tax or taking any penalties. If you are using an IRA for retirement you can expect payments to be made to you but you will have that amount taxed as income. The tax free money is a huge advantage to the life insurance retirement policy.
Some people use borrowing money from their retirement policy as a way to avoid income taxes but this can create big problems later down the road. If the cash amount borrowed reaches the policy amount then the policy holder is hit with capital gains tax on all amounts paid in excess of the premiums, this can be a hard thing to recover from for someone who has been paying in to the policy for 40+ years. At your retirement age you are struggling to pay for estate tax and cover the costs of your health care, a huge tax bill could cause you to lose everything you own.
You may have been shown a great retirement package from the agent you bought the policy from and then find out when you retire it is less than what it should have been. The rates change and if you had a great rate at the time of purchase and they have since fell you will not have the benefits you once though. With a standard retirement package you may be able to have more security in knowing what your benefits will be but they will be taxable and you have less chance to increase them over time. With the insurance policy you can add as much cash to your policy as you wish and you will never be taxed on your payments after retirement but you do have a slightly larger risk involved with your money.
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