Is A Life Insurance Retirement Plan Right For You?
Retirement planning is a multi-phase process that should evolve and grow with your lifestyle from adulthood through your senior years. When you’re ready to start a retirement plan, you should begin reflecting on what financial goals you have and how much time you have until your planned retirement.
When paired with existing retirement options like a 401k or a Roth IRA, a life insurance retirement plan is a great compliment and popular option for many as a means of funding retirement. If LIRP sounds like a typo, it might be faster to call Matador Insurance for a fast consultation. Matador has a proven record of informative support when it comes to retirement planning.
There’s no need to juggle your retirement plans and financial tools, Matador’s retirement planning professionals can help you portion your assets to give you the maximum return. Take the time to plan for a future that you and your family are excited about. Reach out to Matador Insurance for the first steps to your retirement.
What Is A Life Insurance Retirement Plan?
A Life Insurance Retirement Plan (LIRP) is an investment intended to increase the value of future loans against your life insurance plan. A LIRP has the same benefits as an IRA, but you wouldn’t pay taxes on a withdrawal before the standard retirement age, at 59 ½ years old. The cash value of a LIRP behaves like a sort of savings account based on the cash paid over the policy premium.
Access to this cash value is invaluable to someone entering retirement as it can be used to pay for your child’s college tuition, purchase a new house, or supplement in place of income. Funding the entire life insurance policy and borrowing against it later is the common strategy for financially wealthy individuals as the cash value can be withdrawn as a tax-free loan. Having a LIRP means protection for your assets, no fear of penalties, and your account value is often guaranteed to grow.
What Is The Cash Value For A Life Insurance Policy?
Cash value is the investment component of a life insurance policy that is allowed to grow throughout the policy’s life tax-free. It’s exclusive to permanent life insurance policies and is the preferred policy for a life insurance retirement plan. Under a permanent life insurance policy, interest is grown on a tax-deferred basis throughout retirement. Hence, as a person commits more money beyond the minimum payment, they can put that money toward investments in a type of savings account.
At any point, you can take out a loan with that cash value or use it as collateral. If you do take out a loan against your cash or even just withdraw it, you’ll receive your money tax-deferred. Permanent life insurance is designed to be a longer investment than term life insurance, but the benefit is guaranteed, so there’s a 100% chance that there will be a payout, increasing the value of any permanent life policy.
How To Tell If You Qualify For A Life Insurance Retirement Plan
The actual price of permanent life insurance depends on the death benefit amount and the type of policy you’ve chosen. A financial advisor can help calculate the tax benefits and inform on which permanent life insurance plan accords to your situation or needs. Also, if you have already deposited your annual contribution into your IRA account or 401k, you can always use permanent life insurance as a good alternative.
If you don’t have access to a retirement plan through your employer, permanent life insurance can be an excellent alternative to saving for a good retirement. The least expensive life insurance, based on the original price and the coverage you receive, is term life insurance. However, term life insurance will not have a cash value and can’t be used as a life insurance retirement plan.
Pros And Cons Of A Permanent Life Insurance Policy For Retirement
Experts will advise that you first max out the amount in your 401k before investing in a permanent life insurance as a retirement plan. In most cases, individuals aged 49 and under can contribute up to $6,000 yearly to their IRA; the amount increases to $7,000 for those 50 and older.
The maximum amount of contributions to an employer-sponsored 401k account is also $19,500 a year, so the amount that a person can put into their IRA or their 401k is $25,500 a year. Another big benefit to a 401k is that companies often match them, so prioritizing those investments first is usually a good strategy.
Permanent life insurance policies that have cash value, such as whole life insurance, can help fund your retirement, especially if you’re getting the feeling that there’s a gap in your financial stability. LIRPs are great for picking up the slack where a Roth IRA or 401k can’t help you.
Take advantage of the time between now and retirement to build cash value that will fund your future lifestyle. Consider a life insurance retirement plan and call Matador Insurance for a life insurance retirement plan built for you. Matador will be able to help you absorb the information you’re missing and enable your next decisions. Don’t let retirement wait; the sooner you make your investments, the better for your future — so contact Matador Insurance Services for a free consultation today.
