When it comes to financing retirement, the storyline in the financial media is always the same: The pension era is over, and the 401(k) era is here.
In fact, there’s another choice that media overlook. Using permanent life insurance to fund your retirement is not only a viable alternative, but in many ways a superior one to the 401(k) or IRA model.
Consider the drawbacks of 401(k)’s and IRAs. First of all, although they’re referred to as retirement savings accounts, they’re not—they’re investment accounts, meaning it’s impossible to predict whether they will grow, stagnate or shrink. There are no guarantees.
Furthermore, you can only contribute as much money to these plans as
the government allows at your age. You often have a limited range of investments to choose from, particularly within a 401(k). Management fees for 401(k)’s can run as high as 3% a year.
You can take distributions no sooner or later than the IRS allows, or else you’ll be penalized and slammed with taxes. And income taken from the conventional retirement vehicles is counted as ordinary taxable income. When you examine the mainstream retirement funding options, you really see some serious drawbacks.
How does permanent life insurance work as a retirement funding solution? The key is using a custom-designed policy specifically designed to grow large cash values. That cash within the policy becomes collateral for loans issued by your insurance company, loans that can be used to buy cars, finance education and more.
Loans for purchases and education are to be paid back. But retirees typically take out loans to supplement their income, with the intention of not repaying them. Unlike with a bank loan, insurance loans can be repaid when and if you wish. The outstanding balance at the policyholder’s death is simply deducted from the death benefit received by the policy’s beneficiary.
It’s important that policyholders don’t over-borrow against their balance—doing so could affect their policy’s viability and impact the death benefit—but this approach is a truly attractive way to finance retirement. And it’s being discovered by more and more people.
The ability to fund retirement is just one aspect of what makes customized permanent life attractive, however. Used as the foundation of a private banking system, or what I call your “Secret Vault,” your policy can provide a lifetime of:
- Liquidity. It’s easy to access the cash value within permanent life policies whenever we need it.
- Security. Private banking guarantees us an interest rate on the funds we accumulate within the policy’s “savings account.” In the stock or real estate markets, there are no guarantees.
- Tax advantages. The insurance policy’s death benefits are available tax-free, and its cash value accumulates on a tax-deferred basis.
If you’d like to learn more about using permanent life insurance as the foundation of a smarter retirement-funding strategy, don’t hesitate to contact us.
