It’s Not Too Early- Planning for Retirement Using Insurance and Annuities
In my last blog post, I talked about planning for retirement early. I wanted to provide some basic information that I learned from my internship as I worked closely with a team of financial advisors as well as insurance agents. However, retirement is not just black in white in that you put money in your savings and that is it. There are other ways to round out your retirement plan, whether it is through annuities or life insurance. These vehicles include important tax advantages that cannot be overlooked.
First, I will touch on life insurance. Life insurance has significant advantages because the death benefit is not taxable when left for the beneficiaries. There are several types of life insurance. The most popular ones currently are term, universal life, and indexed universal life. The universal life policies and indexed universal life policies also have a cash value, which can be very helpful for retirement. You can choose to superfund your policy so you can stop paying premiums at a certain point, but still get to enjoy the benefits of having a life insurance policy. A lot of policies nowadays also have living benefits so if you qualify, you may be able to take out your death benefit early which can alleviate some stress if hospital bills are of concern. This helps in retirement planning in that you may be able to take out an income from your life insurance policy if need be and/or you may be able to use it in dire situations so it is nice having that safety net. There is a lot of tax benefits in life insurance and it is definitely something to be considered when thinking about retirement.
Another popular retirement vehicle include annuities. Annuities is more like a securities, however, they are offered mainly by life insurance companies. Annuities are meant to pay out a steady stream of income for retirement. I will talk about two types of annuities: fixed and variable. Fixed annuities provide a stable income, per its namesake. Variable annuities on the other hand is more aligned with the market and is not as stable. However, it has more potential for growth. Annuities also come with various riders, depending on your needs. Some include a death benefit, similar to a life insurance policy. Some products offered will pay out however much you invested as the death benefit to your beneficiaries even if you have taken out distributions for retirement. The only thing with these types of retirement vehicles is that the money is illiquid. There are often a surrender period and a penalty fee if money is being withdrawn before the surrender period ends.
With so many products on the market, it is important to do your research. I hope that I have provided at least a foundation that you can go off of. I wanted to share this little nugget of knowledge that I learned in the past two months or so in hopes of getting you to think about retirement, even though it may seem so far off. There are a lot of other factors to consider that I am not yet well-versed in, therefore I urge you only use this post simply as basic information to help you get started and hopefully make retirement planning seem less daunting.