Supplemental Retirement Income
Protecting Your Client's Financial Future
You encourage your client to save money and invest wisely so they can aim at one primary goal—protecting their financial future. This means protecting those they will leave behind in the event of a premature death and saving for future needs, including retirement.
Premature Death Can Be Devastating
If death intervenes before your client has saved enough to leave his family secure, the impact on their financial future could be devasting. A life insurance death benefit assures security for loved ones. Not only can life insurance provide this valuable protection, it can also help your client's financial future by helping them save more for retirement.
Life Insurance Can Do More
Retirement income will likely come from a variety of sources: Social Security, employer-sponsored retirement plans, and personal assets such as IRAs, annuities, mutual funds, and other investments. But for many people, these are not enough. If your client has maximized these options, you may want to recommend life insurance policies that build cash value.
How It Works
Using universal life insurance to help generate additional retirement income makes sense. It can be used for protect a family's lifestyle or help pay off the debts if a premature death occurs. Plus, it offers tax advantages that can help create a source of future income. Here's how it work:
- Premiums are paid for a life insurance policy, which provides death benefit protection and can generate cash value.
- The policy is structured to accept maximum premium payments so the cash values have more potential to grow.
- Any policy cash values accumulate tax-deferred. All of the money that would otherwise be paid each year in taxes remains in the policy and may generate additional earnings.
- At retirement, or anytime during a lifetime, your client may be able to take tax-free income from the policy through withdrawals or policy loans. Loan and withdrawals will lower the policy's value and death benefit and may cause the policy to lapse.
- At death, the policy's death benefit proceeds first repay the insurance company for any outstanding policy loans and the remainder is paid income tax free to the policy's beneficiaries.
Tax Consequences
There are important tax implications to consider when using a life insurance policy to help generate additional retirement income. If a life insurance policy does not stay in force, any income received from the gain in the policy will be taxed as ordinary income. If a policy is a Modified Endowment Contract not only will the gain be taxed as ordinary income, but also a 10% income tax penalty prior to age 591/2.
How Can Ameritas Advisor Services Help?
Ameritas Advisor Services has a variety of life insurance policies that may be able to help you implement this concept. For more information call the Ameritas Advisor salaried professionals.
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