Insure Your Future

Smart Ways To Utilize Whole Life Insurance

29 April 2020 by Sue Palmer

Whole life insurance is designed to both be a protection against unexpected death and a way to save for senior-year expenses. If you're purchasing a whole life insurance policy, here are some smart ways to utilize a policy so that you can take advantage of each of these features.

Save For Retirement Through Multiple Accounts

As helpful as a whole life insurance policy can be when you're saving for retirement, you shouldn't put all your savings into a whole life policy. Instead, invest in a combination of a tax-advantaged account and a whole life policy. IRAs and 401(k)s are some of the most popular tax-advantaged accounts to use.

Any investment you make in a tax-advantaged account will come with tax benefits that can make a big difference in how much you're able to save for retirement. Depending on what type of account you use, you'll either get a tax deduction when you put money in the account or grow your money tax-free after it's put in. A whole life policy doesn't provide these tax benefits.

The funds that grow in a tax-advantaged account can't be used without penalty until you're 59½, however. Thus, you could have a lot of money saved up but be unable to use it for an early retirement or to pay for a child's college tuition when you're in your mid-50s. 

A whole life policy doesn't have any such age restrictions on its investments. You can access the investments in a policy whenever they mature, and an agent can help you select different maturity dates for different parts of the policy's investments. This allows you to determine when you want to access the money -- and you can do so before age 59½.

By investing in both a tax-advantaged account and a whole life policy, you'll get the best of both accounts. You'll be able to grow a sizeable nest egg in the tax-advantaged account, and the funds in the whole life account will give you added financial flexibility before you reach the minimum age for withdrawal from the tax-advantaged account.

Add a Death Benefits Rider

A death benefits rider is a special feature that allows you to access your policy's death benefits if you're diagnosed with a terminal illness and have a short life expectancy. Should you come down with severe cancer or another terminal illness, this rider will let you use the funds your policy would normally provide after your death while you're still alive.

To learn more, visit sites like https://www.dainsurance.com/.

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