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Guaranteed Retirement Income For Life

Updated on September 24, 2010

One of the challenges that has greatly affected the average person saving for retirement is that those reaching retirement age could not afford to loss on their investments. Unfortunately, many people have lost a large portion of their investment portfolio and wish there was something they could have done differently when setting up their retirement. Well for those of you reading this, there is a way. Buy some permanent life insurance.

Permanent Life Insurance

Permanent life insurance is first and foremost, protection for your family in the event of your death. But permanent life insurance also creates a usable cash value that can be used when you retire for the rest of your life. The premiums for permanent life insurance never increase and the insurance amount will increase over time also.

Cash Value

The cash value inside of permanent life insurance accumulates every time you pay your premium because a portion of your premium goes to the cash value. The cash value increases at a guaranteed rate (usually around 3%). The cash value can also accumulate if a dividend is paid into the policy. Dividends are paid into policies which add to the accumulation of cash value. Dividends are based on a percentage of the cash value in the policy. That percentage is posted at the beginning of every fiscal year by the insurance company and does not change for that entire year.

As the years go by and you continue to pay your normal premium, the cash value will accumulate exponentially. You can end up with hundreds of thousands of dollars in cash value at retirement age if you start in your 30's.

Guaranteed Retirement Income For Life

When you reach the age of 59 1/2, this money can be taken as tax deferred income. In other words, because it grew in the life insurance tax free, you are only taxed when you take it out of the policy to use it. You withdraw money from the policy in one of two ways:

Policy Loans

Policy loans are taken by requesting funds from your insurance agent. The loan accumulates at an annual percentage (usually 8-10%). If you continue to pay your premiums as normal, you will be able to pay off a majority of the balance of the loan off. Otherwise, the loan goes against the cash value. You can continue to take out loans until the day you die. When you die the difference of what you borrowed from your policy versus your life insurance amount is received by your beneficiaries.

Annuity Option

If you are looking for a simpler option, annuitizing the life insurance policy turns the life insurance to an annuity. With the annuity option, you can be guaranteed a fixed payment for the rest of your life. The payment is guaranteed and will be the same every month. This is very desirable as it will give you part of the income you need every month for you day to day life. Also, if you live past the time your account runs out of money, you are still guaranteed your monthly payment.

Permanent life insurance is a great way to guarantee a portion of your income at retirement. Product like this that serve a dual function are extremely advantageous in the long term.

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