Taxes are often an over-looked aspect of retirement planning for clients. Many people see their 401k or IRA balance and forget to account for taxes and RMDs. There are many ways to help lessen a tax burden in retirement and turn life insurance into an asset that helps pay for taxes in retirement.
Cash value inside of life insurance policies grows tax deferred and can taken out as a tax-free loan. There are many scenarios where this might be an option, but one way is to cover tax debt caused by RMDs. When taking an RMD, a client owes taxes on the distributed amount. One option is to take a tax-free loan from a life insurance policy’s cash value, use the loan to pay for the tax debt, and then repay the loan with some of the RMD funds, provided the client doesn’t need them for income.
Housing cash inside of a life insurance policy gives the client access to cash in retirement to help with taxes while getting a much better return than any savings account at a bank.
There are lots of unique products that call fit this need for your clients, so give us a call to discuss the options for cash in retirement.