Life insurance is essential in the event that the main income earner of a family dies at an early age, but it is a much more valuable financial vehicle than many people realize. The right life insurance policy can protect your income, and offer a tax-free cash flow, all while offering the peace of mind that every family wants. Even in your retirement, your family will need to be protected in the event of your death, especially if your children are still in college or if your spouse has minimal or no retirement savings. This is especially true when both Social Security payments are necessary for a comfortable retirement, as one will go away at the tome of the spouse’s death.
Studies show that most couples amass the bulk of their retirement fund in their final 10-15 working years. Life insurance can be used to protect these earning years, and eliminate the possibility of retirement savings being curtailed due to death. By purchasing a 10 or 15-year term life policy on both spouses, there is no need to worry that the sizable savings typically accumulated during these years do not materialize. A convertible policy may be more appropriate as your financial needs change and the term life can then be converted to a whole life policy. This is also a good option that will render all future health changes a non-event as the policy is priced at the age of the policyholder at the time they purchase the policy, rather than when they convert it.
Current whole life policies offer returns between 3-5 percent without the risk inherent in other financial investments. With interest rates still at historically low points, this investment strategy can increase the return that you realize through your overall investment portfolio. In addition to these favorable returns, life insurance can also be structured to yield many significant tax benefits. The cash value of many whole life policies offer tax-free income withdrawals while also providing a hedge against future tax rate increases. All of these tax implications become more impactful as you near retirement, and making smart choices can have a positive effect on the preservation of your principal. Tax shelters become more important as you age and life insurance provides many tax advantages.
Life insurance is not always considered a key component of investment and retirement planning, but it can provide a wide variety of advantages. If you are planning for retirement and want to ensure that you have a solid foundation for your family and your own retirement years, you may want to consider adding life insurance to your overall financial portfolio. Speak with your insurance agent today to learn more about the peace of mind, tax benefits, and principal preservation advantages that life insurance can provide for you and your family. Life insurance offers a lot more than just a death benefit and it is worthwhile to take a look and learn more about how this versatile financial instrument can help you.