Strategies to Use Life Insurance for Retirement
Typically, when we talk about a life insurance plan, it is usually about providing financial assistance to your dependants in case of your untimely death. But life insurance is not just about that. Rather it has the potential to be much more depending on how you make use of it. Take any financial plan, and life insurance can be a vital part of it. It can help your family members who are financially dependent on you to recover from financial risks and unforeseen expenses while increasing the possibilities of achieving the long-term goals.
Sadly, not everyone acknowledges and appreciates the role of life insurance plan in enhancing retirement planning. When we talk of financial protection, retirement planning can seem overwhelming, but expenses vary as life moves forward. If you have the right type of life insurance plan and adequate coverage in retirement time, it can be beneficial to accomplish many jobs. These jobs include protecting your income, improving total returns on the portfolio, managing taxes, and providing tax-free cash flow and peace of mind.
Everyone aims to retire rich. However, this depends on how much you earn in your active years and how smartly you save it. Investing in products that can bring you maximum benefits in future years is key to lead a relaxed life in retirement. For this, you need to start investing in long term plans as early as possible. Life insurance is one such plan that not only helps you to save for the long term but also brings numerous benefits.
Thinking how to utilize a life insurance policy for retirement benefits? Here are a few strategies that will help you plan your retirement efficiently with a life insurance plan.
- Providing retirement income – There are many ways life insurance policy can prove beneficial to support your expenses in retirement time. One of the very popular ways is to exchange the life insurance policy for an annuity product that will offer long-term income.
This policy is usually for individuals who do not aim to get a huge death benefit but rather need a monthly income to meet the expenses. The second option is to surrender the existing life insurance policy for its cash value or sell on the secondary market to create cash flow.
- Maximising pension strategy – A life insurance plan can come as a saviour to compensate for the loss of pension, annuity, or social security that has ceased when the earning spouse is no more alive. In case of single life pension payout or annuity, when the annuitant is deceased, the payments are automatically stopped. Life insurance can provide the surviving spouse with the required assets to meet the expenses. This is called pension maximisation as the life insurance policy assists the pension or annuity payout for the dependant member (spouse).
- Long-term care planning – Life insurance plans can be used to plan for funding long-term care expenses. Many policies offer an accelerated death benefit clause, which enables you to get an early and reduced payment of death benefit in some cases.
One can choose a life insurance plan with the long-term care rider or exchange the existing policy for the one that comes with an add-on option of long-term care benefit.