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Use Life Insurance\’s Cash Value For Some Of Your Retirement Income

by

Shane Flait

With a few years left before your retirement, consider contributing more to your life insurance for future income use. Life insurance can help you shore up your retirement income shortfall. Here\’s how…

You can project how much additional retirement income you\’ll need. Just determine the amount of income you\’d need to cover your living expenses for you and you spouse. From that, subtract your Social Security and pension income.

Then consider how much savings you have and what annual income you can pull from them without depleting your savings. Subtract that \’savings income\’ too. Whatever shortfall remains to cover your living expenses is what you must generate from more savings. You might consider using your life insurance to do this.

Life insurance is an investment that has value, growth potential, diversity and protection. It, along with its cash value, can help you supply the extra retirement income you\’ll need in later years.

Clearly, the first purpose of life insurance is to provide a death benefit to a beneficiary – perhaps your spouse. She\’ll receive the death benefit free of income tax. So, if you die before saving enough for your spouse\’s income, carrying enough life insurance is the solution.

Pick up an optional total disability benefit rider – often available on whole life and universal life – that can help fund the policy to provide retirement income even if you become disabled.

Your policy\’s cash value can provide you with tax-free cash either through withdrawals or policy loans. Of course loans and withdrawals will reduce the policy\’s death benefit and cash value, but you may purposely overfund the policy just so you can access some cash when you need it.

A benefit of using life insurance as a savings vehicle is the tax-deferred growth of the cash value. The dividends it pays and withdrawals you take are considered a return of your premiums (i.e. your contributions).

Only when you pull more out than you contributed will you generate taxable income. Also, if you\’ve added large amounts of premiums to the policy, the IRS then calls it a Modified Endowment Contract which is considered a savings vehicles rather than life insurance. In that case, the dividends are taxable as income to the extent there is gain in the policy. However, any dividends applied to reduce the policy\’s annual premium or to buy additional insurance remain untaxable.

Unlike other tax-deferred retirement plans, you\’re not limited in the yearly contributions you make. And, you\’re also not obliged to make minimum required distributions after reaching age 701/2.

Shane Flait helps you with your financial legal, tax, and retirement goals. Get his FREE report on Managing Your Retirement =>

easyretirementknowhow.com/FreeReportandSignUp.htm

Read his ebook: \’Wise Way to Financial Independence\’ =>

easyretirementknowhow.com/WiseWayGate.htm

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