Life Insurance as a Retirement Savings Tool

— September 1st, 2023 —
Published in News
on finance.yahoo.com
Written by Brian Baker, CFA

Most people probably think of life insurance as being a tool to protect your loved ones in the event of an unexpected death. Life insurance helps people manage that risk effectively, but it can also be used in other ways.

Permanent life insurance pays a death benefit to the policy’s beneficiaries, but also comes with a cash value component, which can build over time on a tax-deferred basis. This cash value can be borrowed against or withdrawn tax free as long as the amount doesn’t exceed what you’ve paid in premiums and the policy remains in place.

Life insurance gives wealthy investors a way to build tax-free income that they aren’t able to create through the use of a Roth IRA. Life insurance policies don’t have the income restrictions or contribution limits of IRAs. Wealthy investors may benefit from using life insurance policies to create tax-free income, but be sure to understand the policy’s details and the fees you’ll be charged before signing on the dotted line.

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finance.yahoo.com

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