Today’s Life Insurance Can Pay For Tomorrow’s Retirement

In my insurance career, I’ve yet to meet very many people who want to talk about life insurance right off the bat. But when I get folks to understand that having life insurance today can lead to a successful future retirement … everyone’s ears perk up.

Like the famous combination of peanut butter and chocolate, life insurance and retirement planning can go together with beneficial results. Of course, you should consult your financial advisor because while this strategy has its upsides, it’s not a perfect fit for everyone’s plans.

I recently read an online column by Alice Holbrook about how permanent, or whole life insurance policies can help fund retirement. Permanent life insurance presents an opportunity to put some of your premiums into a separate account that builds cash value (in addition to your death benefit). You can withdraw or borrow against this cash value to help fund your retirement.

A possible drawback is that loans and withdrawals will lower your death benefit unless they are repaid. And should you borrow more than the surrender value, your policy could lapse. For some people, though, it can help to not have all your eggs in the same basket when it comes to your retirement. Permanent life insurance can add diversity that you might need in your portfolio.

There may be tax advantages to getting cash from your life insurance for retirement. For instance, if your retirement planning has $50,000 annually coming from an IRA or 401(k), with an additional $25,000 in Social Security, your total taxable income is $75,000. If instead the $50,000 comes out of life insurance, your taxable income could be only $25,000. Tax savings are nothing to sneeze at.

Is funding retirement through life insurance for everyone? Your financial advisor can help calculate whether it’s right for you. If you’ve reached the maximums on your IRAs or 401(k)s – and have a need for life insurance – it’s worth looking into.

Here’s how to determine if you should think more about life insurance funding your retirement:

If you’re older and have a high net worth, and contributing the maximum to your 401(k) or IRA, you could benefit from tax savings from life insurance withdrawals.

But if you don’t need life insurance and haven’t yet reached your highest earnings, an IRA or 401(k) will probably be a better investment.

Are you interested in beginning a conversation on this topic? I would love to talk with you more! My expertise in health and life insurance, along with disability and long term care, allows me to find the best solutions for you. Send me an email at — I look forward to answering all of your questions.

Robert Smith

Sales Associate | Kingsburg