You probably are already aware that one of the main purposes of life insurance is to provide your beneficiaries with a sum of money when you are gone, but did you also know that it can offer other benefits? As you begin to plan for your retirement, you may want to research how your life insurance policy can be used as an extra source of income during your retirement. If you want to learn more about how your life insurance policy can help boost your retirement fund in Mansfield, Texas, Connect Insurance can help. Read further to learn more about using life insurance for your retirement.
Accumulating a Source of Funds
Certain types of life insurance can provide supplemental retirement income, but it is important to note that not all of them do. Investing in permanent insurance like universal, whole life, or variable policies will help accumulate cash value while a policy owner makes premium payments over a period of time. A policy owner will be able to borrow against the cash value of the policy for whatever they need, for example, making a down payment on a home or another type of large bill, and borrowing from these insurance policies often offer better interest rates than taking out a personal loan. It is important to note that utilizing your life insurance policy’s funds lessens the cash value and the death benefit, but when used carefully, can be an effective source of funds during your retirement.
Protection During Market Fluctuations
Equity investment and retirement account values do fluctuate, which can cause issues if you are relying on them as your income stream during retirement. If you withdraw money from an equity-based retirement plan during a downturn in the market, the amount of principal that future returns will be based on will decrease. Having a substantial amount of cash value from a whole life insurance policy can help support you financially in the event of a volatile economic market.
Using Your Life Insurance Policy for Tax Advantages
Taking money from the cash value of your life insurance policy offers another major benefit due to the fact that it is not subject to taxes up to the amount paid into the policy through out of pocket premiums. Again, utilizing the cash value of your life insurance policy will reduce the policy value and the death benefit, and it does increase the chances of the policy lapsing. If a policy lapses with an outstanding loan balance, that amount will be taxable.
Get Assistance With Your Life Insurance for Your Retirement
Certain life insurance policies can potentially be a worthwhile option for supplementing your retirement income. If you want to explore your options with your life insurance policy and learn how it can help enhance your retirement, contact Connect Insurance in Mansfield, Texas for a consultation.