Numerous individuals use the basic choices available for putting aside tax-advantaged assets, which is 401(k)s and IRAs. However, savvy individuals are utilizing permanent life insurance for a supplemental retirement income plan (SRIP) as one of their vehicles.
Here are the reasons why life insurance is a good option for a supplemental retirement income plan:
Savings & Investment Benefits
- The cash accumulation can be used for supplemental retirement income or as your own personal piggybank for emergencies.
- You can access the cash at any age, should need for cash arise before retirement.
- Products with guaranteed crediting rates offer protection against market loss.
- Indexed universal life policies (IULs) provide upside growth potential.
- IULs and whole life policies won’t decrease due to market volatility, so they offer downside protection.
Tax Benefits
- Growth is tax-deferred, so no tax is due on the appreciation of cash values.
- Access (tax-free) to the accumulated cash. You can make withdrawals up to basis and take out loans.
- No Social Security tax, unlike required minimum distributions (RMDs) of qualified plans.
- The death benefit can provide tax-free income for your heirs.
- The death benefit is paid directly to your heirs so it avoids probate.
Lifestyle Benefits
- There are no required minimum distributions (RMDs) at age 70 1/2 as with qualified plans.
- Depending on where you live, there is protection against creditors and lawsuits.
- Some policies offer living benefits from your death benefit that allow you to take part of the death benefit early under certain circumstances such as a terminal diagnosis.
- Anyone can purchase life insurance, there is no minimum age or income requirement. However, it does have health and financial requirements.
- With a Disability Payment of Premium rider, premiums will continue to be paid if you’re disabled.
Today we live in a world of low-interest rates and volatile stock markets. Permanent life insurance provides unique benefits as a savings instrument for retirement income. A well-funded SRIP can provide you the income you need for a more secure retirement.
This strategy has been around for decades and it’s just as potent today as when it was first introduced. If you see the potential and can afford to take advantage of the benefits, an SRIP may be the answer to securing your retirement income.
