You're maxing out your 401(k) and IRA contributions, but you know it's not enough to maintain your standard of living during retirement. What do you do?
An insurance-based retirement plan (IBRP) is one way to protect your family's financial future. You can own one of these plans in addition to any qualified plans you already have. An IBRP offers two great benefits:
- Death benefit
- Supplemental retirement income
But what is an IBRP and what can it do to help secure your financial future?
Benefit #1: Protect Your Family
In an IBRP, a life insurance policy provides coverage that protects your family in the event of your death. This death benefit is the most important part of the policy. It provides the funds your family needs to pay bills, your final expenses, and maintain a standard of living after you're gone. That money is paid out to your beneficiary (or beneficiaries) when you pass away. That cash is 100% income-tax free, and if we set up your policy correctly, it may also be estate-tax free. If you're worried about how your family would get by without you, the death benefit takes care of that.
Benefit #2: Save for Retirement
With an IBRP, you get more than basic death benefit coverage. You can also invest additional money in the life insurance contract, where it grows tax-deferred. It's similar to the way you invest in your traditional retirement accounts.
As that additional money grows and earns interest, it becomes a source of income you can draw upon to help pay for retirement or other expenses. As long as you keep the policy current and we set it up correctly, those withdrawals are tax-free with no age or use restrictions.
Here's a list of benefits you get from setting up an IBRP:
- Tax-free death benefit
- You choose how much premium to pay and how often
- Grow tax-deferred cash value while you work
- Tax-free supplemental retirement income
- Withdraw funds at any time, even before age 59.5
- No requirement to take distributions at any age
- Some policies offer additional investment choices, with conservative and aggressive choices
There are many more benefits of life insurance than we're covering here. I can help you figure out where life insurance fits into your financial plan.