Protecting Families, Futures, & Finances
Why Owning Whole Life Insurance In Retirement Makes Sense
Increase Social Security Benefits For Self And Others
The accumulated cash value within a whole life insurance policy can be accessed to help supplement retirement income while delaying filing for social security benefits until the age at which benefits to both the worker and the worker’s survivors can be maximized. Taking social security earlier directly affects survivor benefits for life, and there are no “do-overs.”
Tax Diversification
The tax deferral of life insurance cash value can allow taxpayers to diversify among other assets they own that are currently taxable and reduce current taxable income that isn’t needed, which potentially reduces taxation of social security benefits
and exposure to the Medicare surtax on net investment income for higher income taxpayers.
Asset Allocation
Whole life insurance is not subject to market risk, which can allow for riskier equity-based investments to continue to be part of a retiree’s portfolio as a hedge against inflation,
but not in such a heavy concentration that it exposes the retiree to unnecessary market risk.
Cash Reserve For Emergencies
A recent survey of pre-retirees and retirees revealed that some were unprepared to address unexpected healthcare costs and home repairs. Depending on how it’s funded, cash value can accumulate within a policy and, generally, be accessed tax-free through loans and withdrawals to help cover such emergencies There’s no bank loan or line of credit issues involved. The life insurance policy remains in force until it is surrendered, lapses, reaches its stated maturity date or the insured dies, whichever comes first as long as you continue to make required premium payments.
No Minimum Required Distributions
Unlike qualified money in retirement plans or IRAs, there are no required minimum distributions from life insurance policies funded with after-tax dollars. This gives retirees more choice about when to access the cash value in a life insurance policy, if needed to help supplement retirement income.
No pre-age 59 1/2 10% Tax Penalty
Assets that are left to accumulate in a whole life insurance policy not only are tax-deferred but can be taken out income tax-free at any time without penalty. There is no need to wait until age 591/2 or for one of the other exceptions to apply to avoid having a 10% penalty tax imposed as with tax-qualified accounts. This allows retirees to better time withdrawals from tax-qualified accounts when they will only be paying straight income taxes. People love flexibility and dislike being penalized for accessing their money when it’s needed!