When you, as a young working individual, think of retirement, what do you envision? A life where you no longer have to work and can simply enjoy all the comforts of home and family? Or maybe you see yourself exploring the world? The opportunities are endless, at least for you who’s yet to retire. However, the reality for those who have already bid farewell to their professional lives and entered retirement is completely different.
A recent Allianz poll shows that 61 percent of Americans worry more about running out of money than they are about death itself. Another 59 percent are afraid when thinking of how they’ll pay for their healthcare costs once they retire. All of a sudden, retirement doesn’t seem all that rosy to you, does it?
To ensure a stress-free life after retirement, most Americans opt for life insurance policies. According to Annuity.org, around 172 million Americans currently own life insurance. It’s also been observed that a lot of these insurance owners are very young, usually under the age of 25, which shows that people these days are getting insurance early just to save up more money for their retirement.
Of course, not all types of insurance policies are ideal. If you’re aiming for a happy and stress-free life after retirement, you might want to consider whole life insurance. Here’s why.
#1 Lifetime Coverage and Death Benefit
One of the primary benefits of getting a whole life insurance policy is its lifetime coverage. Compared to term life insurance, where you will only get coverage for a specific period, a whole life insurance policy guarantees protection throughout your entire life. Just make sure that you pay your premiums on time.
What you’re looking for in particular here is 20-pay life insurance. It’s something that requires you to pay 20 premiums or annual installments. In return, it acts as an additional source of income for your family in the event of your demise.
As explained by 1891 Financial Life, 20-pay policyholders receive lifetime coverage. This policy also lets you access a portion of your total death benefit in the event that you’re diagnosed with a serious illness. Of course, the illness in question will have to be qualified by the insurance provider first before you can access those funds.
#2 Cash Value Accumulation
When you opt for a whole life insurance policy, you’ll be introduced to a unique feature that’s called cash value accumulation. Through this feature, a portion of your premium payments will go towards building cash value within the policy. The major benefit of this feature is that over time, the cash value will grow tax-deferred, and you don’t have to pay any taxes on the growth till you withdraw it.
The ability to accumulate cash value offers a powerful advantage, as it can serve as a source of funds for various needs during retirement. Whether you need extra income, want to cover medical expenses, or want to leave a financial legacy, the cash value component of whole life insurance can provide flexibility and financial stability.
#3 Guaranteed Growth and Dividends
Another compelling reason to consider whole life insurance is its guaranteed growth and dividend potential. Whole life insurance policies have a guaranteed minimum interest rate, ensuring that your cash value will grow over time.
Additionally, some insurers may offer policyholders the opportunity to earn dividends. These dividends are not guaranteed, but if the insurer performs well, policyholders can receive annual dividends, which can be reinvested to further enhance the cash value or be withdrawn to supplement retirement income. This combination of guaranteed growth and potential dividends makes whole life insurance an attractive asset-building tool.
#4 Tax Advantages
Whole life insurance offers several tax advantages that make it a smart choice for retirement planning.
Firstly, the cash value growth is tax-deferred, allowing your money to grow faster compared to taxable investments. Secondly, if structured correctly, you can access your cash value through policy loans or withdrawals on a tax-free basis, providing you with tax-efficient income during retirement. Lastly, the death benefit is typically income tax-free for your beneficiaries, ensuring that they receive the full amount to protect their financial future.
#5 Estate Planning and Legacy
Apart from retirement planning, whole life insurance also makes sure that you get to leave a financial legacy by playing a significant role in estate planning. When your beneficiaries receive the death benefit, it can help cover estate taxes, meaning your heirs will be able to inherit the assets without having to bear the burden of excessive tax liabilities.
Moreover, the death benefit can be structured to provide ongoing income to your loved ones or support charitable causes that are important to you. By incorporating whole life insurance into your estate planning strategy, you can leave a lasting impact and provide for future generations.
According to US News, most Americans report retiring at the age of 62. If you’re aiming for a similar retirement age, you ought to start saving now, and whole life insurance is arguably the best way to do so, as you can tell from our discussion above. Not only will it help you live stress-free after your retirement, but it’s also a great solution for safeguarding your assets.
