In our experience, most people have not been properly educated on the many advantages that life insurance policies may carry. With advancements in how policies can be constructed in the past decade or two, consumers can now design policies to help fund retirement incomes, cover long-term care concerns, help with college savings, or build up an emergency fund, all tax-advantaged. This isn’t your grandpa’s life insurance anymore.
Maybe you've dealt with an aging parent or grandparent with long-term care concerns either in an assisted living or nursing facility or even in-home care. This has become an increasing planning concern for many as baby boomers are retiring and life expectancy and illnesses continue to rise. One of the issues with traditional long-term care insurance is what if you never need it? What if the premium costs continue to increase? By using a life insurance policy instead, you can guarantee the premium cost to remain level or even design it to have it paid in full in 10 or 15 years. If you get sick along the way, some companies can advance portions of the death benefit tax-free to cover care costs whether it’s at home or in a facility. If you never end up needing the care or funds to cover care, at least your spouse or children can receive more than all the premiums you paid in also tax-free, where traditional long-term care insurance premiums are lost.
Life insurance policies can also be used as a method for tax-deferred growth and tax-free income when carefully designed properly as well. You can fund a maximum annual amount that the IRS allows for the amount of death benefit of the policy and the difference between the policy costs and the maximum funded amount can be invested to grow tax-deferred like that of a qualified retirement account. Some policies allow for stock market index linked growth with no risk of loss due to a market downturn. If and when you’d like to access the funds, you can take a loan from the policy tax-free or take a taxable withdrawal. This can sometimes be a beneficial supplemental savings vehicle in addition to employer sponsored retirement plans and IRAs that many people use in their planning once other accounts are maxed out.
In addition to using life insurance policies for long-term care and retirement savings, many have seen the benefits for using them for college savings and emergency savings. One of the benefits of savings inside a life insurance policy is that the cash surrender value is accessible anytime, it doesn’t carry the age 59.5 rule that many retirement savings have. We’ve seen many people use them to save for college and have their children or grandchildren keep the policy for life with flexible access, instead of an account like a 529 plan that is restricted for educational purposes only.
While life insurance policies are first and foremost a planning tool to cover a death benefit need, as you can see here, they can be designed for many different uses and tax-advantages. Many companies even use them for employee deferred compensation benefit packages that can be an attractive benefit. There are many different types and options, so working with an experienced, independent firm can be very important.
If you’re curious as to what a comprehensive, transparent plan might look like for your family, please reach out to us at Advanced Wealth Strategies, (704) 450-8352, conveniently located at 19520 W. Catawba Ave, Ste 313, Cornelius, NC 28031.
Second opinion reviews can be important for peace of mind, they are always complimentary. Do you have enough confidence in your existing planning to get a second opinion? Let’s get started!
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