If you’re starting to think about retirement, there’s a good chance that you have considered IRAs, 401(k)s, annuities, and all the other well-known retirement savings vehicles. But have you ever thought about making life insurance part of your retirement portfolio? 

Let’s see how cash value life insurance fits into your plans.

While life insurance is primarily known for its death benefit protection, a cash value life insurance policy can also serve as a tax-efficient retirement tool. In fact, the cash value of a life insurance policy can be so helpful that some companies refer to these products as life insurance retirement plans (LIRPs).

Life insurance for retirement can be an effective strategy.

While New York Life does not use the term LIRP, we do recognize the important role cash value life insurance can play as you prepare for retirement. That’s because the cash value of a life insurance policy grows tax-deferred within your policy and is a resource you can use to supplement your retirement income. Of course, when you access the cash value in a life insurance policy for supplemental retirement income, you will reduce the death benefit and the available cash surrender value. Since income taxes are only paid on withdrawals that exceed your basis, it’s important to consult your financial professional or tax expert and make sure the policy is structured the right way. 

Does it make sense to use whole life insurance for retirement?

Since whole life insurance builds cash value, it can be an excellent choice for anyone interested in pursuing this strategy. In particular, you may want to consider a Custom Whole Life policy since it gives you the ability to generate cash value even faster than a traditional whole life policy might. 

Using life insurance for retirement income.

While many retirees periodically withdraw a portion of their cash value to help supplement their retirement income, another strategy you may want to consider is to use the cash value that builds up in your policy to purchase an income annuity. Since an annuity returns the principal you invest with the annuity issuer, it can create a steady, dependable flow of income that you can count on in your retirement years. Either way, it’s important to make sure that your need for life insurance protection has changed, and that withdrawals can be a taxable if they are not done properly. Be sure to consult a financial professional or tax-expert before employing either strategy

Protect the value of your retirement assets.

You may also be interested to know that the cash value of a life insurance policy can be an effective way to protect your retirement assets during a downturn in the market. How is that? Cash value can be accessed* for any financial purpose. Assuming that you have made a long-term commitment to the policy and built-up considerable cash value, you may be able to use this resource instead of selling other retirement assets while prices are depressed. 

This sounds great. How much life insurance should I buy?

While each person’s needs are different, it’s important to remember that this strategy is designed to provide supplemental retirement income and should therefore be considered a complementary piece of your retirement portfolio. Here again, a New York Life financial professional can provide some valuable insight and help determine your policy needs.

How do I get started?

The best way to get started is to make sure you have all the information needed to make an educated decision. We recommend that you speak with a New York Life financial professional who can review all your options, answer all your questions, and make sure you know exactly which type of coverage makes the most sense for you.