As retirement gets closer to reality, you will need a strategy for using your savings to maintain a lifestyle you can really enjoy. Among the most important moves you will make during this time is determining how to use your assets to produce an income that will support you for the rest of your life. Cash value life insurance can help play a role in that strategy. But it can also do more than help supplement your retirement income*. With proper planning, life insurance can help preserve your wealth and help pay Federal taxes, allowing you to pass your assets - intact - on to your heirs.
* Withdrawals and policy loans can only be made in accordance with policy provisions and if the policy has been in force long enough to accumulate sufficient value. Loans, withdrawals and death benefit accelerations will reduce the policy value and death benefit. Loans are subject to interest charges. If a policy lapses while a loan is outstanding, adverse tax consequences may result. Policy loans are generally not taxable when taken and cash withdrawals are not taxable until they exceed basis in the policy. However, if the policy is treated as a Modified Endowment Contract (MEC) by IRC Sec. 7702A, withdrawals and loans are taxable at an ordinary income tax rate when taken to the extent of gain in the contract and the gain may also be subject to a 10% federal income tax penalty if taken prior to age 59½. Cash distributions associated with benefit reductions, including reductions caused by withdrawals during the first 15 years, may be taxable. Policy owners should consult with their tax advisor regarding their particular situation.