When we think about life insurance, we usually think about it as a way to support our loved ones financially if something happens to us. But did you know that life insurance can also help you with your retirement plans? In this article, we’ll explore different ways to use your life insurance to secure your retirement.
Life Insurance Tips for Retirement Planning
Build Savings with a Permanent Policy
Some life insurance policies, like whole life or universal life, don’t just provide financial protection; they also build savings over time. When you pay your premiums for these policies, a portion goes toward coverage, and the rest is invested. This investment part grows tax-deferred, and it includes the money you put in and any interest you earn.
You have different investment options based on your policy and the insurance company. Some policies link your savings to an index, like the S&P 500, so your money grows with the stock market. Others offer a fixed rate of return, which is safer but might not earn as much.
This kind of life insurance is excellent if you want both coverage and a retirement fund. When you get older, you can even use the money you’ve earned to pay your policy premiums, so it keeps working for you. Just remember to contribute enough over your life to build a substantial retirement fund.
Invest Your Savings from a Term Policy
Unlike permanent life insurance, term life insurance doesn’t build savings, and it only covers you for a set period. However, term policies typically have lower premiums. This means you can save money by choosing term insurance and then invest your savings in a retirement fund of your choice.
You have more flexibility here because you can decide where to invest your savings. You could put your money into stocks, cryptocurrencies, real estate, or other investments. The choices are yours.
Borrow Money from Your Policy
If you have whole life insurance, you might be able to borrow money from it. Essentially, you can take a loan from your policy’s value, and you can decide to repay it with interest while you’re alive, or the amount gets subtracted from the death benefit when you pass away. Some insurance companies offer this option, or you can explore third-party loan programs.
Surrender Your Policy
For those with permanent life insurance who can’t afford their policy anymore, surrendering it is an option. This means ending your coverage in exchange for a check that includes your policy’s cash value minus some fees.
However, it’s not a recommended choice if you’re near retirement. You’ll only receive a small amount in return. Instead, you can get more money by selling your policy in what’s known as a life settlement.
Sell Your Policy
Your life insurance could be one of your most valuable assets, potentially worth as much as your house. Just like any valuable asset, you can sell it for a significant cash sum. This process is called a life settlement, and it can provide you with a payout worth a substantial portion of your policy’s death benefit. It’s usually much more money than what you’d get if you surrendered the policy.
Why Selling your Life Insurance Policy can be a Great Choice for Retirement:
You get a lump sum of money, which you can use to cover your retirement expenses, such as daily living costs, vacations, or creating an emergency fund.
You no longer have to pay expensive insurance premiums, saving you money.
You can recoup money from a policy you no longer need. While life insurance is crucial when you’re young and want to protect your family, it may not be necessary when your loved ones are financially independent.
If you’re thinking about selling your life insurance for retirement, reach out to Moss Life Settlements for a free estimate to find out how much your policy is worth!
