How Does Life Insurance Fit Into a Retirement Plan?

Nov 16, 202211/16/2022

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How Life Insurance Fits into a Retirement Plan

When it comes to retirement, you may not think of life insurance. As a broader retirement plan, life insurance can help protect your family’s financial future if something unexpected were to happen to you. According to the life insurance research organization, LIMRA, 6 in 10 Americans (57%) feel at least somewhat confident that they will be able to live their desired lifestyle in retirement.

One of the best ways to incorporate life insurance into your retirement planning is to find the right policy for your specific needs. Here are some ways life insurance can help you secure your financial future.


Life Insurance Options

Types of life insurance include term, which provides coverage for a certain number of years, and permanent, which provides coverage throughout your lifetime.


How Term Life Insurance Works

Term life insurance is typically the most affordable life insurance option. It guarantees protection for a specific amount of time but has no cash value, and its premiums will not increase during the initial policy term. When the initial term ends, your coverage may end or you may have the option to renew on an annual basis.

Term insurance can provide basic financial protection for your family if you were to pass away, such as replacing lost income, maintaining a certain lifestyle or paying off any debts. Second, the lower premiums can help you allocate more disposable income towards your retirement, college savings or other financial goals.


How Whole Life Insurance Works

Whole life insurance is permanent insurance that provides death benefit coverage for your entire life. The policy guarantees a death benefit to your beneficiaries in exchange for set premium payments. In addition to the death benefit, whole life insurance also contains a component that can build cash value on a tax-deferred basis, depending on which type you choose. Over time, cash value may be able to accumulate as a portion of your premium payments are consistently set aside (as long as the cost of insurance is covered). The cash value and interest grow tax-deferred, which means you won’t pay taxes on them until you decide to use it.1

A whole life insurance policy can play a useful role in your retirement planning. Most whole life insurance accumulates cash value, which helps to provide peace of mind. If there is enough cash value available, you do have the option of withdrawing funds from your policy or take a loan against it to use the money for unexpected emergencies, to supplement your retirement2, help pay premiums, or anything else you’d like.1


Plan Ahead for Retirement

As you look ahead to retirement, it’s worth exploring how a life insurance policy can be incorporated into your retirement plan. For many pre-retirees, life insurance can help you safeguard your finances and create a more secure future. To learn more, consider working with a Representative to find the retirement strategy that’s right for you. Click here to find your local Representative.


Term Life Forms: ICC16 8648 1-16 & Form 8648 1-16 (XX)
Whole Life Forms: ICC17 8678 1-17; 8678 1-17 (XX)]
  1. Loans and withdrawals will reduce the policy’s death benefit and available cash value. Excessive loans or withdrawals may cause the policy to lapse. A loan, withdrawal or surrender may be a taxable event. For tax advice, consult with your professional tax advisor.
  2. Life Insurance is not intended to serve as a primary source for retirement, pension income or deferral of taxable income.


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