Life Insurance In The Retirement Plan
Retirement may be a long way off. It may be right around the corner. Perhaps it's already here. With 401K, individual retirement plans (IRA), and pension plans available, why have life insurance in the retirement plan?
Self completing
Do you have a family and/or a business?
If so, if you should die before reaching the age of retirement, do you want to be sure your family has a place to live, your business will be able to survive, and your family or business will not have to struggle financially?
If you have kids, do you want to be sure the college fund you have for them will have enough money for them to go to college whether you're here to see it happen or not?
What if everything goes as planned whether or not you have a family or business?
Would you like to have a fund you can access any time? Perhaps you want to retire early. Perhaps you have a cash crunch.
Whether you die too soon or live too long, a permanent life insurance policy will allow you the flexibility to do a lot of things that the aforementioned retirement plans do not, such as no penalties for accessing it, and if properly structured, it can be accessed tax- free.
The cash value can be used to supplement retirement income or it could be the retirement plan itself.
At some point, we all die. When that happens, not only will you have had the living benefits, there will also be a tax-free death benefit to a beneficiary of your choice-your family, your business, or a charity-whomever you decide.
Self directed
Who would you rather have in charge of your retirement planning and life planning? Would you rather it be the IRS or you?
There are self-directed retirement plans available but if they are tax-qualified plans they are subject to IRS rules and conditions.
Life insurance is not a tax-qualified plan.
As a result, it can be truly self-directed by the owner. It's not to say there are no rules and conditions but they are much more relaxed and there is much more flexibility in reference to how much you can contribute and when you can access it.
Furthermore, you can have more than one. You can use different policies for different purposes, including for retirement.
Pension
There was a time when people worked for a company for many years and upon retirement they received a pension. Although not completely extinct, they have become rare.
Pension plan definition according to an online dictionary:
"a fixed amount, other than wages, paid at regular intervals to a person or to the person's surviving dependents in consideration of past services, age, merit, poverty, injury or loss sustained, etc.: a retirement pension."
Technically, life insurance is not a pension plan but it can be used in lieu of and can be offered by an employer or created by an individual for that purpose.