Life Insurance And Retirement Annuities

Life Insurance And Retirement Annuities

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Life insurance and retirement annuities both have similar concepts. That is, providing funds to those you’ve left behind. But, life can insurance can give you more than simply a death benefit. For example, an indexed universal life (IUL) policy may be a way for some retirees to gain tax-free* income. In addition, there are times where an IUL may protect some of your assets. Though not for everyone, an IUL is one option that retirees may consider.

Another reason some people look into IULs: potential return. If you have funds in a low-interest CD or money market account, for example. In this case, an IUL may be another choice. However, there are many other investment types each with its own set of rules. At Marathon Group Financial, we know how critical it is to tailor financial products to each individual client. Life insurance and retirement annuities may be part of a retirement plan for some.

Your Life Insurance Plan

Using life insurance in retirement planning is a factor for some retirees. Due to tax-free income, an IUL may have benefits for certain situations. Keep in mind, and IUL is simply an insurance policy. Therefore, its premium has different rules about taxes. In addition, it has different ways to use the money than investments do. In other words, the money you put in may be available to you differently than in other financial accounts.

If you currently have a 401(k) or a traditional IRA, for example, your withdrawals are subject to taxation. Also, upon reaching a certain age, you may need to take out money from those accounts. This required minimum distribution, also known as RMD, is important because if you don’t take the money out in the correct percentage by the correct time, you could see a heavy fine. Instead, some retirees choose to convert some of their retirement account money over to an IUL slowly. In this way, you may be able to take money out from your IUL without an income tax on those dollars.

Choosing Life Insurance and Retirement Annuities

When you are near (or, in) retirement, things begin to change. Typically, retirees begin to seek more secure places to put their money, instead of having risk in the market. Your life insurance needs may also change. Earlier in working years, life insurance may have been protecting an income for your family. Perhaps in retirement, this need seems not as urgent. However, your current life insurance policies may be able to convert to an IUL or other types of plans. Each situation is different, so be sure to reach out to see what you may be able to do with your current policy.

Protecting family will always be important, of course. But, retirement comes with new challenges that could change your initial plans. For example, tax issues may change. Therefore, the type of life insurance you choose and may matter more now. This is why Marathon Group Financial takes our time with clients. We explain the details of life insurance and overall retirement options. Life insurance and retirement annuities may, indeed, go hand-in-hand. An indexed universal life policy can sometimes be an option for part of the protection plan in retirement.

Retirement Life Insurance Potential Benefits

Here’s a shortlist of some reasons to take a look at an IUL:

  • Protection of cash value, even in a down market
  • An index, not the stock market, links to IUL
  • You may be able to lock in potential gains
  • Possible diversity of indexes
  • Tax-Free* income potential
  • Take out money, possibly tax-free*
  • Flexibility to fund all at once or slowly over time
  • No excess fees for pulling money out before age 59 1/2

Also, IUL’s may provide certain benefits after your lifetime as well.
Some of these benefits may include:

  • Death benefit may be higher than the premium payments you make
  • Benefit upon death is not subject to income tax
  • No probate court
  • Could be an income over time or a lump sum payment
  • A possible option for using some of the death benefits for chronic or terminal illness

Marathon Group Financial does not believe in a “one-size-fits-all” plan. IULs have their place for some retirees, but not all. So, be sure to contact us to discuss your situation. We’re here to help you plan for your whole life.

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*Proceeds from an insurance policy are generally income-tax-free, and if properly structured, may also be free from estate tax. Income-tax-free distributions are achieved by withdrawing to the cost basis (premiums paid), then using policy loans. Loans and withdrawals may generate an income tax liability, reduce available cash value, and reduce the death benefit, or cause the policy to lapse. This assumes the policy qualifies as life insurance and is not a modified endowment contract. The Host and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. This content is not intended to serve as the basis for any investment or purchasing decisions, nor does it recommend or involve the purchase, holding, or sale of a security.  All figures herein are hypothetical and for illustrative purposes only to explain general concepts.  No figure is to be relied upon as being accurate nor a guarantee or projection and is meant only as a partial overview of some relevant features and benefits of general insurance products that may be in the marketplace, and whose availability will be dependent on the State of residence of the consumer, and their individual suitability for the product they are wanting to purchase. Where insurance products are mentioned, any and all guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

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