For most of us, our ability to work is our most valuable asset. When we work, we get a paycheck, and that paycheck buys food, pays rent, and goes into the bank where we can rely on it when we need it. But what if you want to grow your money without a paycheck?
The Problem with Traditional Retirement Accounts
During your working years, you probably contributed to a 401(k). But if you rely on your employer's 401(k) program to fund your retirement, you're also relying on your ability to show up for work each and every day. If you aren't able to work, you can't get paid. You can't contribute to your 401(k) and your employer certainly won't contribute if you can't. Is there a way to grow your money that isn't dependent on your employer or your ability to work? There is.
I've talked with lots of my clients about how to plan for financial freedom. The first thing I advise them to do is invest in permanent life insurance. Unlike a term policy, a permanent policy can accomplish several financial goals at once, unlike a 401(k).
Let's take a closer look.
The Benefits of Permanent Life Insurance
With permanent life insurance, you get a cash value account that's attached to your policy. In the early years of the policy, your premium payments help fund the cash in this account. It grows based on a rate of return specified in your policy documents — oftentimes, it's a set percentage of interest. There are also types of permanent life insurance that let you tie your cash value to market growth, while protecting you from the risk of a downturn.
No matter which type of permanent policy you choose, your cash value grows as long as you keep your policy in force. Over time, you can build up quite a nice chunk of change to pull from later in life. For most folks, they start withdrawing cash value when they retire and want more money to maintain their standard of living.
Here are some specific benefits of a cash value account:
- Tax-free death benefit for your beneficiaries. As with all life insurance policies, your beneficiaries get a cash payout that is not subject to income tax.
- Tax-deferred cash accumulation. While your cash value accumulates, you don't pay a dime of income tax on that accumulation.
- Tax-free supplemental retirement income. You can withdraw money from your cash value account or take a loan against it.
- No penalties for early distribution. Unlike IRAs, you can take a distribution from from your cash value account before age 59 1/2 without a penalty. Plus, you don't have to take a distribution at age 70 1/2.
- Loan repayment built-in. When you pass away, your policy's death benefits will first go toward paying off any policy loans you have outstanding. The rest will go to your beneficiaries income-tax-free (according to IRS Section 101).
If you like the idea of having extra money available to you during your retirement, permanent life insurance may be your answer. You can protect your family during your lifetime, supplement your existing retirement fund, and transfer wealth to your heirs after your death...all with one financial product.
Of course, I don't want you to overlook the primary reason for buying life insurance - the financial security and peace of mind it brings to your loved ones. Depending on your needs, we can even create a customized solution with permanent and term life insurance to make sure your short- and long-term needs are met.
To get started, call me or send me an email today!
Note: Policy loans and partial withdrawals may vary by state, reduce available surrender value and death benefit or cause the policy to lapse. In most cases, policy loans or partial withdrawals won't be taxable as long as you limit your withdrawal to the amount of premiums you've already paid. Consult all policy documentation or your agent for details.