I recently read about a U.K. Journalist named Nigel Reynolds, who was the first journalist to interview J.K. Rowling, author of the Harry Potter series, as she attempted to publicize her new book.
They met for coffee, chatted, and then J.K. handed him one of the first editions of her book as a parting gift to say “thank you” for his time. Nigel said his farewell and headed back to the office where he skimmed through the book and tossed it into the garbage – not knowing its future value. He didn’t understand how a story about a young wizard would ever catch on. Only 300 of that first edition were ever printed and each one is estimated to be worth over $55,000 today.
Don’t dismiss or discard something of value to others when you don’t fully understand its true value yourself.
Unfortunately, many people do not fully understand the value that life insurance can provide as part of a well-rounded retirement plan. Having the correct type and amount of life insurance coverage in retirement will do wonders for you and your family. It can help protect your income, provide tax-free cash flow, help manage taxes, provide peace of mind to families, and even improve the total returns in a portfolio. Here are a few ways retirees are using life insurance:
- Protect Your Income and Savings
When one spouse passes away post-retirement, the surviving spouse often struggles to meet their income needs when a pension check, or one of the two Social Security benefits the couple was receiving, goes away. If one spouse dies before retirement, the surviving spouse could end up being severely short on retirement savings due to the lack of income available to do so.
- Manage, Reduce, or Eliminate Your Taxes
Life insurance receives preferential tax treatment. When properly structured, life insurance can provide tax-deferred growth, tax-free cash flow, and a tax-free death benefit. This can provide a hedge in a rising tax environment and can give you more control over how your income is taxed.
- Improve Your Investment Returns and Asset Allocation
Bank accounts and Bonds are not producing much interest these days and still carry some risk. However, a permanent life insurance policy can provide long-term bond-like returns of 3 to 5 percent without the risk. Life insurance also allows an individual to have greater flexibility over which dollars to use during retirement (taxable, tax-deferred, or tax-free), and depending on the type of life insurance, it can also provide a non-correlated asset to your investment portfolio providing additional diversification.
Don’t dismiss life insurance because you don’t fully understand it. Don’t ignore the retirement benefits of life insurance. Don’t underestimate its future worth. Life insurance can provide much more than just protection during your working years. It can continue to provide protection and benefits for the rest of your life, and then provide a financial legacy for your spouse, children, grandchildren, church, charity, or other beneficiary. Contact us today to see how this valuable financial tool can help you improve your financial life.