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Financially protect your family & help supplement income for your retirement

 

If you’re concerned about the financial security death benefit protection can provide for your family today should something happen to you, and you’re also uneasy about the future and falling short of retirement income, it may be time to consider life insurance. With life insurance you gain death benefit protection that can help your family pay the mortgage, utility bills, and other expenses should you die. Now, imagine your retirement. What retirement lifestyle do you imagine? It’s easy to underestimate the cost of your ideal retirement. Permanent life insurance can help bridge any gap between what you have already saved and what you will need in the future. If you’re looking to control your financial future, consider a permanent life insurance policy with the potential to build cash value that can be used to help supplement your retirement income.

WHY LIFE INSURANCE?

Life insurance can help you with two unknowns—the loss of income from a premature death and having sufficient income to enjoy your retirement. With life insurance:
  • You gain death benefit protection not only during your important working years, but also in retirement. In the event of death, the proceeds are distributed to your beneficiary(ies), generally income tax-free.
  • Your premium payments into a permanent life insurance policy pay for the insurance coverage and expenses and a portion may accumulate cash value on a tax-deferred basis.2 Through policy loans and withdrawals,3,4 the cash value may then be used during retirement as a source to help supplement income.
Cash value on our policy can be used how you see fit.

WHO CAN BENEFIT?

There are a few items to consider when deciding whether to use life insurance as part of your retirement planning. First, consider your need for life insurance today—think about the items your family will need to pay on their own without your income, should you die prematurely. Next, take a close look at your retirement plan. Will you have sufficient assets to live your planned retirement lifestyle? Is there a potential need to help supplement your retirement income. If these items concern you, you’re not alone.

Two-thirds of Americans worry about having money for retirement. When asked why, 50% are concerned about the economy and 45% said they haven’t saved enough for retirement.
* Life Insurance Market Research Association (LIMRA) “LIMRA’s Facts About Life” 2015.

Here are a few questions to consider to help you determine if using life insurance for financial protection and a strategy to help supplement your retirement income is right for you.
  • Do you have a need for life insurance protection today to help replace your income in the event of your death, to help your family pay for items such as the mortgage or rent, insurance premiums, automotive expenses, property taxes, and groceries?
  • Are you planning for retirement and are between the ages of 30 and 60?
  • Are you interested in having additional retirement income stability?
  • Have you utilized a qualified plan (such as an IRA, tax-qualified annuity, 401(k), or savings plan offered through your employer) or don’t have access to a qualified plan for retirement planning?
This list is not complete and there are other items to consider. Your life insurance representative can take a closer look and help you evaluate your needs.

LIFE INSURANCE ADVANTAGES

  • Immediate financial protection and control. Gain death benefit protection for your loved one. You own and control the life insurance policy.
  • Tax-deferred growth. Your premium payments may earn interest and grow on a tax-deferred basis.
  • Flexible premium. With a universal life or an indexed universal life (IUL) insurance policy, you can adjust your premium payment based on available resources. However, there are limits on the amount of premium that may be paid into a policy to qualify as life insurance.
  • Generally tax-free distributions. Any potential cash values within your policy can be taken as generally income tax-free loans and withdrawals, as long as the policy is not a Modified Endowment Contract (MEC). Withdrawals are income tax-free up to the cost basis. (Cost basis is the amount equal to the total premiums paid.)

LIFE INSURANCE DISADVANTAGES

  • Reduced death benefit. Additional premiums may be necessary to continue the desired death benefit, depending on funding. Policy loans and withdrawals will reduce the death benefit and may cause the policy to lapse. Withdrawals may be subject to surrender charges that may reduce the death benefit and cash value.
  • Non-guaranteed performance. Cash values for loans and withdrawals in later years may be more or less than originally planned. Minimum premium payment requirements must be met to maintain the policy, provide for cash value growth, and avoid lapse if the policy becomes over-loaned. Depending on funding, life insurance may not guarantee avoiding loss of premium.
  • Premium payments are not tax-deductible. Your premium payments for life insurance are not tax-deductible.
  • Avoid creating a Modified Endowment Contract (MEC). Life insurance policies that surpass certain premium limits can be classified as a MEC. MECs may be subject to unfavorable tax treatment. Talk with your life insurance representative for more details and learn how to structure your policy appropriately.
  • Cost of insurance. Permanent life insurance policies require monthly deductions, which include cost of insurance, expense charges, and potentially other charges. These deductions may reduce the cash value of the policy.
  • Surrender charges. Withdrawals may be subject to surrender charges and the amount available for policy loans.

HOW DOES IT WORK?

After a thorough needs-based discussion with your life insurance representative, you select a life insurance policy that matches those needs. Your representative will help structure the policy to match the desired death benefit coverage, and provide you the ability to access any potential cash values to help supplement your retirement income.

 

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Robert E. Chittick is CEO of the LHENetwork. He is also the founder and partner of LHENetwork, The Life and Health Experts, Canaan Financial Group and Canaan Marketing. He is a sales coach and trainer for insurance agents, financial advisors and planners since 2001. He can be reached at rchittick@cag-1.com.
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