Many life insurance companies provide life insurance services from which you could benefit while you are still alive.
Old school life insurance:
You die, your beneficiary gets your death benefit. A prime example of this is the free $50,000 term policy you may get from work. To be expected, you have to die to use it which is all well and good for your beneficiaries. But for yourself? Not so much.
Newer kinds of life insurance policies offer several benefits that you can use while you are still breathing. Think cash value, living benefits, and lifetime income options. It may sound crazy but you could even potentially retire off a life insurance policy.
I’m not pitching any specific product or company here but merely hitting the highlights. Of course, not all companies or all policies will offer the same benefits and you’ll probably want some advice from a savvy fiduciary financial professional who keeps up to date on what is available. (Fair warning: not all of them do.) But the right life insurance riders (additional added benefits) can provide more options than you may have previously imagined, increasing your odds of coming out ahead financially while you’re still among the living.
First, you want to make sure you have the right amount of life insurance, second, you need to get the best life insurance coverage.
Three ways to cash in on life insurance for retirement:
Rich people roth
I basically call the cash value on permanent life insurance a “Rich People ROTH” because it’s most useful for people who make too much money to use a regular Roth IRA, or for those who have already maxed out their other retirement accounts and want to save more money tax efficiently.
Essentially, if you set up the policy properly you could save any amount you want into the life insurance policy, and the cash value would be treated basically like a ROTH. That means your contributions not only grow tax-free but come out tax-free too.
There is a bevy of health-related living benefits and riders that can be added to policies at difference insurance companies. The three most common benefits cover Terminal Illness, Chronic Illness, and Critical Illness. I won’t bore you will all fun diseases and ailments that may be covered. Just know that financially it can be much more expensive to suffer for years with a chronic illness versus simply passing away too soon (which has some definite downsides too).
No one buys insurance hoping to get sick but rather to diminish the potential for financial devastation that can occur if you do, particularly later in life. Since health insurance can’t do it all, these living benefits will help you have more options to cover costs that can grow exponentially.
You can also strategically use the cash value as a personal pension. Some policies will have a “lifetime income rider.” If you plan ahead and stash enough cash into the policy, you can essentially create your very own pension that comes out to you tax-free.
Most of us hope to die peacefully in our sleep – preferably after a lovely meal with lots of carbs and plenty of wine – when we are 100+ years old. I wish this for myself and I wish this for my husband and I wish it for you. But meanwhile, since there are no guarantees, a good life insurance policy can make the best of the uncertainties that are part and parcel of being alive.
Live for today, save for tomorrow.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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