Life Insurance as Investment for Retirement

Today, people not only look at life insurance merely as life protection, it is become a combination of protection and investment as well. More than ever, people use life insurance as investment or to complement their retirement planning. It is expected that most of us will never maintain our current lifestyle form our saving or current pension plan during retirement years. You should consider life insurance as investment, if you are serious about accumulate some money for your retirement. This article will highlight some important aspect of life insurance as investment choices for your retirement planning.

First, there are two main groups of life insurance: term life insurance and whole life insurance. In the former, when you buy term life insurance, you pay monthly premiums in exchange for death benefit over specified period. Once the contract reaches its maturity (usually in 10 year), you need to renew the policy. It sometimes comes at new higher price. If you die while you are in the contract, your beneficiary will get a large sum of money. This is as long as you are continuing paying the premium.

In permanent or whole life insurance, your insurance policy will be protected until you die. You need to pay premium monthly for specified term 10 – 20 years. In the beginning, it is anticipated that the premium is more expensive measured against term life insurance. However, don’t be surprised that later in life it will become less expensive and comparable. Some portion of monthly payment is set aside for investment. Insurance company will put it in an accumulation account.

You cannot go wrong with whole life insurance! It allows you to save cash value account and you should know the main benefit of it: it’s tax-deferred. Your cash account will grow in cash value to complement your retirement investment and taxes are postponed on income and capital gains.

There is argument over whether whole life insurance is better investment. It is comparable to buy affordable term life insurance and set aside the rest of money to any investment of choices such as stocks, mutual funds, REI, bonds or any other investment of choices. In making that decision, there are several outcomes that you should count:

• Your ability to pay the premiums. First off, you had better check how much insurance you need. Following that, you will need to check the premium costs for both term and whole life policies. If you are able to afford only the term policy, you should buy it. You should never skimp on the amount of your death benefit.
• Your Fed and state tax brackets. The benefit of a tax deferral is only as valuable as the amount of taxes that would be deferring. The higher your tax bracket the more of value the benefit is.
• The possibility that you might not be able to get affordable insurance later in life. Because expected health issues growth with age, this could be of major concern. If it is, compare guaranteed renewable term policies with the price of whole life.
• Your willingness to shop for no-load (or, no commission) insurance policies. Unless you buy no- or low-load insurance policies, the costs of whole life erode returns so much that it almost always makes more sense to buy term insurance and invest the difference.

Whether you are starting your retirement planning or have your company pension program in hand, you may consider life insurance as supplemental for your retirement planning. You must carefully weight the pros and cons before deciding whether life insurance has a place in your investment or retirement plans. If it does, educate yourself and shop wisely, preferably opting for low- or no-load products that will meet your needs.