Since life insurance is primarily known for its death benefit protection, people often overlook the important role the cash value feature can play in preparing for retirement. This article takes a close look at cash value life insurance and explores some of the reasons why you should consider adding it to your retirement portfolio.
While New York Life does not use this term, LIRP is an acronym that stands for Life Insurance Retirement Plan. Technically, a LIRP is not a retirement product in itself; instead, it’s a strategy that uses the cash value of a life insurance policy to help fund your retirement.
Since the primary purpose of a life insurance policy is to provide death benefit protection, this strategy is best for people who think their coverage needs will decline later in life, and who have a long-enough time frame to generate a significant amount of cash value. So, it is very important to consult a financial professional before taking any action.
If you have life insurance coverage through your workplace, you will most likely lose that benefit the moment you retire. And because most workplace policies offer term protection, there is no cash value associated with that coverage. If you purchase a whole or universal life policy on your own, however, you will enjoy long-term protection and continue to build cash value well into your retirement.1
If you plan on using life insurance to help fund your retirement, it’s important to purchase a policy that offers significant cash value appreciation potential as a feature. That means you will want to consider three types of coverage: whole life, and variable universal life.2 A New York Life financial professional will be happy to review the advantages of each policy and help you decide which best meets your particular needs.
While life insurance is generally not considered an investment, a variable universal life policy does give you the opportunity to invest your cash value in a set of professionally managed investment options composed of underlying stocks or bonds, that are included in your policy. Of course, a variable universal life policy involves both upside and downside potential. If you would like to explore this type of coverage, be sure to speak with a financial professional who is licensed to sell securities.
* Accessing the cash value of a permanent life insurance policy will reduce the available cash surrender value and the death benefit.
1 As long as all premiums are paid on a timely basis.
2 Variable universal life insurance is offered only by prospectus. Please ask your registered representative for a prospectus containing more complete information about the policy, including investment objectives, strategies, risks, and charges. Please read the prospectus carefully before investing. NYLIFE Distributors LLC, Distributor.