Life Insurance as a Tool for Retirement Planning

Last Update: September 7, 2021 Insurance

When it’s time to leave the workforce behind, many retirees worry about not having enough income to sustain their lifestyle. Enter life insurance. As an effective retirement planning tool, life insurance can provide a financial cushion when you and your family need it most.

It usually requires a large asset-base if you want to retire comfortably. One that can withstand annual withdraws and still grow over the years. However, life insurance is an underutilized tool that can help you make up the difference if you lack the necessary funds.

The Benefits of Whole Life Insurance

Unlike term life insurance, whole life guarantees a death benefit when you pass. Because of this, you need to contribute to the plan consistently over the years. However, by doing so, you build up the policy’s cash value, which you can access at any time during retirement. Whole life insurance is also a great product if you plan to leave an estate to your children or grandchildren. It’s also valuable for spouses who risk severe income reduction if their partner was to pass away.

Most importantly, whole life insurance can lead you down the path to a healthy retirement. Insurers offer plans that only require payments for a set number of years. Many plans are structured as 10-year policies where you pay premiums for 10 years and never make any future payments. While your money is invested, it continues to grow, which can help increase your funds in retirement. As well, if you happen to pass away, your loved ones are guaranteed a death benefit.

Planning and Customization

Because whole-life policies come in all shapes and sizes, you’re able to customize the plan to fit your needs. You can choose your contribution amount and desired death benefit. However, the larger your contributions, the higher your death benefit will be. Moreover, your account’s cash value is available whenever you need it. You can use the funds to purchase a new home, remodel your existing home, or pay for long-term care for an aging loved one. Like other investing forms, the earlier you start, the more time your cash value has to grow. And tackling the issue early increases your chances of achieving your long-term goals.

Don’t Forget The Death Benefit

Like we mentioned above, your beneficiaries are guaranteed a death benefit when you pass. Say you take out a $300,000 policy that requires a $6,000 annual contribution – your loved ones are guaranteed to receive that amount when you die. Moreover, if you pass away after only making a few years of payments, your beneficiaries still receive the full amount.

Why You Should Consider Whole Life Insurance

When people think of whole life insurance, they assume it only pays dividends when you die. But, as we outlined above, the product provides a solid income stream that can guide you through retirement or ensure your grandchildren have a head start in life. Whole life insurance is also extremely tax-efficient, allowing you to meet current obligations and plan the future.



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