Life Insurance – The Crux of Retirement | All that you need to know about Life Insurance |


They say that the most effective retirement planning tool is time. The earlier you start planning for your retirement, the easier it gets. Generally, life insurance policies are viewed as a safety net against the untimely loss of the breadwinner in the family. Only a handful of people know that life insurance policies can also be a great tool for retirement planning. If you choose the right type of life insurance policy, you can plan for your retirement and protect your family against financial uncertainties at the same time. If you take a whole life policy, a part of the premiums paid builds up in a separate account that has cash value in addition to the death benefit.Here’s why a life insurance plan is a great tool for retirement planning: –

Retire Early

A permanent life insurance plan or a whole life policy can help you retire early. The payouts from the policy can easily fund the early years of your retirement. You can get tax-free access to the cash value of the policy either through loans or partial withdrawals. However, one needs to be careful, as too much of policy loan or cash withdrawal can lead to high-interest rates.

Track Your Retirement Savings

The best way to shield your retirement savings is by taking up a simple term life policy. Studies have shown that the death of a spouse in case of retired couples severely compromises the retirement income for the other. Therefore, a term life policy for 10-15 years for both partners can shield the retirement savings. Since term life policies are cheap, it won’t become a financial burden on the couple.

Protect Your Income Even After Retirement

If one spouse passes away before the other, the surviving partner often struggles to make the ends meet. In such scenarios, a life insurance policy can be a great blessing as it allows the surviving partner to maintain the same standard of living.

Tax Management

Life insurance plans are a great retirement planning tool as they offer generous tax savings. If you manage your insurance policy carefully, you can enjoy tax-deferred growth, tax-free death benefit and many more benefits.

Borrow Against the Cash Value

A drawback of life insurance policy is that your beneficiaries receive the death benefit but not the cash value. The only way to benefit from the cash value of the policy is by taking up a loan against it. However, this should only be done if the borrowed amount including the interest, does not exceed the cash remaining in the policy.