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Preparing for life after retirement is not on everyone’s "to-do list." However, planning how to generate tax-free retirement income with a life insurance policy should be a priority. The Martin Insurance Team of Evergreen Park, IL, can create a life insurance policy that matches your needs.
Generating Tax-Free Retirement Income with a Life Insurance Policy
The benefit of having life insurance is the policy’s cash value. If structured correctly, the cash value should grow over time and become your primary source of tax-free retirement income. However, you must consistently pay your premiums throughout your working career. The more money paid into the account, the more money available to be withdrawn in retirement. This is because the policy’s cash value is not a taxable commodity.
Choosing Between Whole Life and Universal Life Insurance
To plan for a tax-free retirement income, you start by creating a whole life or universal life insurance policy. Each investment option builds cash value over the life of the policy. Remember, whole life insurance premium rates are fixed and never change for the length of the agreement, allowing the cash value to grow over time. Universal life insurance offers flexibility in the amount of the premium payments each month. The policy’s cash value will increase, but it occurs over a longer period than whole life insurance.
Important Points to Remember
Review the cash value of your life insurance policy before the end of each fiscal year. This will confirm if the policy’s value is growing as expected. Before withdrawing money, you need to apply for a policy loan. This is a tax-free option, as you must repay the loan according to the policy terms.
If you still have questions about starting a tax-free retirement income plan with life insurance, contact the Martin Insurance Team in Evergreen Park, IL. We can help you learn more about living on a tax-free income. Call and schedule an appointment today.
