Life insurance as alternative retirement income stream
For many years we grew up grateful that Social Security and Pensions existed, and additional sources of retirement income was an option for those wanting a more comfortable lifestyle. Today's Pensions are scarce, and the life expectancy range is causing people to wait longer for Social Security benefits. That leaves the average American looking for alternative sources of retirement income.
Rental income has always been a good source for those with the patience of becoming landlords or the knowledge to "flip" houses. Investing in a business can also be profitable but if these alternatives aren't quite right for you, consider a life insurance plan.
There are several types of life insurance policies, each with its own cash value accumulation rules. The most common type is Whole Life which offers a level premium and guaranteed cash value growth. Universal Life, Variable Universal Life, and Indexed Universal Life offer more flexible payment options as well as the potential for greater cash value growth.
The right plan in an appropriate situation can help an investor contribute via a variety of investment choices to the cash value portion of a life insurance policy. Keeping in mind that the primary reason for a life insurance policy is the death benefit, you don't have to worry about how long you live, as the death benefit of the policy will take care of your beneficiaries after you're gone.
The cash value accumulated can be used in later years to cover needs like small emergencies, fund higher education expenses, pay off mortgages on a rental property, fund the expansion of a business, or be used as an income stream.
There are a few ways that you can structure this type of retirement income stream. You can set it up as an annuity, which will give you a fixed income for life, or you can take it as a lump sum. You must be careful with this option as it may carry tax implications but If you're healthy and have a long life expectancy, you may want to consider taking the lump sum and investing it.
It's important that you consult with your advisor to make sure this method works for you and that it gets initiated properly. Ongoing management is also important so making sure that you choose the right plan is imperative. You can potentially benefit from great tax advantages, and this can be a profitable way to grow your tax-deferred cash flow especially if you have maxed out on your allowable retirement contributions. Talk to your advisor today and learn how this may work for you!
Securities and insurance products are provided by Cetera Investment Services LLC, member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Advisory services are only offered by Investment Advisor Representatives. Cetera is under separate ownership from any other named entity.
The cost and availability of life insurance depends on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.