The right life insurance policy can drastically improve the amount of income you have available to you during your retirement. It’s one of the least known income preservation secrets—but also one of the most important.
There are three major ways life insurance enhances and preserves income: through cash value accumulation, by supplementing other insurance needs, and by ensuring your legacy.
When you have a permanent life insurance policy it accrues cash values, which can be accessed before your death. These accumulated cash values can be used to pay the premiums due for the policy or they can be used to fund tax-free loans in order to supplement income, pay for emergency expenses and cover medical costs.
If you need to, you can even surrender a permanent life insurance policy and take a check for the cash values—although keep in mind this may be a taxable event and could be subject to surrender charges.
If you aren’t careful, a large portion of your postretirement income could be spent paying various insurance premiums— including long-term care insurance. Once you look at potential LTC premiums and see how quickly they will deplete your income you might decide to skip this notably expensive coverage. But with long-term care expenses easily averaging $4,000 a month, forgoing LTC insurance puts your savings even more at risk.
If, instead, you buy a life insurance policy with long-term care rider you can enjoy complete long-term care protection at a much lower cost. Even better, any benefits not used for long-term care expenses will be given to your beneficiaries upon death.
Many seniors struggle needlessly because they want to make sure they have some assets to leave behind after their death. While creating a legacy is an understandable goal, it could put a major strain on your income if you don’t plan for it carefully. Instead of limiting your postretirement income to ensure there’s something left behind for your heirs, have a life insurance policy that guarantees your legacy without sacrificing income.
Life insurance isn’t just a death benefit you provide to loved ones—it’s a lifeline into income security throughout your retirement years.
In the next volume of the INCOME PRESERVATION SECRETS series, we’ll talk about the many ways a properly structured annuity can help you preserve your savings, pay for long-term care expenses, and guarantee your postretirement income.