{"id":15180,"date":"2019-06-12T04:00:00","date_gmt":"2019-06-12T08:00:00","guid":{"rendered":"https:\/\/insurancenewsnet.com\/?post_type=oarticle&p=4169973"},"modified":"2019-06-12T04:00:00","modified_gmt":"2019-06-12T08:00:00","slug":"life-insurance-an-important-part-of-protecting-your-clients-income","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2019\/06\/12\/life-insurance-an-important-part-of-protecting-your-clients-income\/","title":{"rendered":"Life Insurance An Important Part Of Protecting Your Client\u2019s Income"},"content":{"rendered":"\n
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\nIdaho State Journal (Pocatello)<\/span>\n<\/div>\n
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Most people agree that life insurance is preparation for the unthinkable. It certainly is, but it can be more than that \u2014 in fact, you can use life insurance as part of your retirement income plan.<\/p>\n

Some policies, known as permanent insurance policies, have an investment component that can build cash value. With these policies, you can effectively become your own bank, dishing out tax-free paychecks in retirement while never losing money in the market.<\/p>\n

Here\u2019s how it works.<\/p>\n

(Over)Fund Your Future<\/p>\n

A Life Insurance Retirement Plan (LIRP) uses the cash value in life insurance to fund tax-free withdrawals and loans that serve as income during retirement. LIRPs require over-funding life insurance policies, meaning you pay more than the premium amount, to adequately fund your future income. As such, a LIRP strategy usually works best over time.<\/p>\n

While different than the traditional 401(k) and individual retirement accounts (IRAs) usually associated with retirement saving, LIRPs provide unique benefits for retirees.<\/p>\n

First and foremost is investment safety. LIRPs are structured so you can never earn less than 0 percent. While it\u2019s true that you won\u2019t earn big in boom years, more importantly, you won\u2019t lose in bad markets, like back in 2008.<\/p>\n

LIRPs also help keep your tax liability low and provide protection against rising future rates.<\/p>\n

See with life insurance, you\u2019re not taxed on withdrawals equal to the amount of money you\u2019ve put in the policy. And you can take tax-free loans against the policy\u2019s cash value. This setup enables you to drive down your taxable income in retirement.<\/p>\n

Another obvious benefit of life insurance is it provides a death benefit to your loved ones. Keep in mind though, the death benefit is net of any loans against the policy.<\/p>\n

A less-obvious benefit of life insurance is protection against costly long-term care via \u201caccelerated death benefits\u201d for terminally ill policyholders. While not a primary reason to obtain coverage, protecting your assets from costly care is valuable to your retirement plan.<\/p>\n

Proper Fit a Must<\/p>\n

While the idea of using insurance for protection and income may sound enticing, it\u2019s important to understand that LIRPs aren\u2019t for everyone.<\/p>\n

In general, if you aren\u2019t hitting contribution limits on your 401(k) and IRA plans, start there first to maximize tax advantages and matching employer contributions. Similarly, if you\u2019re at a point in life where you don\u2019t need life insurance, there are probably better strategies than a LIRP for your money.<\/p>\n

But if life insurance is a need and you\u2019re already contributing all you can to other retirement accounts, a LIRP can work well to generate tax-free retirement income. Since there are no contribution limits with permanent life insurance, it\u2019s possible to build up quite an income base. However, it\u2019s critical to manage the policy so it doesn\u2019t become a modified endowment contract and lose its tax-favored status.<\/p>\n

Making a LIRP Work<\/p>\n

Ron, an engineer, and Nancy, a pediatrician, are both 65 years old and newly retired after successful careers. They plan to withdraw $75,000 annually from their 401(k) and IRA accounts, supplementing that with $25,000 per year from Social Security, to live on a total of $100,000 per year in retirement.<\/p>\n

Sounds great, right? It follows the \u201cconventional wisdom\u201d so prevalent today.<\/p>\n

But there\u2019s a problem.<\/p>\n

As it stands, all their retirement income is all taxable. And like most people, they want to be in a lower tax bracket while retired so their money stays theirs.<\/p>\n

If Ron and Nancy had a LIRP, that $75,000 portion of their annual retirement income could come from life insurance instead of taxable retirement accounts. This would make their taxable annual income $25,000 (from Social Security), rather than $100,000.<\/p>\n

In other words, they\u2019d pay much less to Uncle Sam every year.<\/p>\n

Beyond the Traditional<\/p>\n

If it fits into your situation, a LIRP can offer several benefits to your retirement that aren\u2019t available with \u201ctraditional\u201d retirement planning \u2014 safety from market volatility, tax-free income and more.<\/p>\n

But again, LIRPs aren\u2019t for everyone. They make sense in the right situation. To see if a LIRP can fit into your retirement plan, seek help from a qualified insurance professional.<\/p>\n

A trusted professional can help craft the right strategy for your situation and sort through potential solutions. Plus, they\u2019ll be there in the future to help manage the policy so you can be confident in your retirement income, no matter the state of the markets.<\/p>\n

Holly Peterson is the owner of Elite Retirement Strategies and a former radio show host. You can find her online at eliteretirementstrategies.com<\/a> or by calling 208-252-4345.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

Read the original article at insurancenewsnet.com <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Idaho State Journal (Pocatello) Most people agree that life insurance is preparation for the unthinkable. It certainly is, but it can be more than that \u2014 in fact, you can use life insurance as...<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/15180"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=15180"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/15180\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=15180"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=15180"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=15180"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}