Retirement In Sight: Can Your Life Insurance Policy Help You Out in Retirement?

Under certain circumstances, your life insurance policy can play a crucial financial role. Besides a death benefit, a permanent life insurance policy can accrue cash value over time (provided the premiums are paid). That cash value could prove useful in or near retirement. If you need to, you could withdraw some of it to pay for medical procedures, home improvements, long-term care, or a child’s college education. It could even provide you with additional retirement income. Moreover, distributions from a permanent life insurance policy are tax-free as opposed to distributions from traditional IRAs (and some other retirement plans), which are taxed at regular rates.

There is one notable negative. When you take cash value from a life insurance policy, it is not a withdrawal—it is a loan. You are borrowing against the value of your policy, and in doing so, you reduce its death benefit. You can restore the full value of the death benefit by paying back the loan in full, but that loan may carry 7–8% interest. Also, life insurance premiums and fees can be costly when weighed against other retirement savings vehicles. Dollars that fund a permanent life insurance policy are also dollars that could go into retirement accounts for which you do not pay premiums to keep up.[1]

How Can You Actively Age?

The Centers for Disease Control and Prevention says that less than a third of adults age 65–74 are physically active. Adhering to a fitness routine may be half the battle. What can you do to make working out less like work?

One, find an activity you truly enjoy—hiking, yoga, Zumba, softball, pickle ball, what have you. Think about what motivates you most to exercise, keep that motivation top of mind, and link it to your activity. Another way to make a sport or workout even more enjoyable? Listen to some music, podcasts, or audio books, safety permitting. Finding others to join you may help dedicate you to being physically active, and so can scheduling time for your fitness routine. Importantly, you should talk to your doctor to see what kind of exertion your body can take on and how the sport or activity you embrace corresponds to the pursuit of your fitness or weight loss goals. On another note, you can look for other ways to incorporate more walking and movement into your everyday life.[2]

On the Bright Side

In 2014 (the most recent year for which data is available), the average contributor to a traditional IRA received a $4,885 federal income tax deduction.[3]

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Lighthouse Financial, LLC., a Registered Investment Advisor. Cambridge and Lighthouse Financial, LLC., are not affiliated.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

1 – [5/17]
2 – [1/19/17]
3 – [2/4/17]

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