The need to save more money for retirement may seem obvious — particularly to those approaching retirement age — but successful retirement planning should start much earlier than that. Fortunately, there are a variety of options available.
The majority of saving for retirement occurs through qualified or non-qualified retirement accounts. According to the most recent Employee Benefit Research Institute (EBRI) Retirement Survey, at least four in five say they anticipate receiving retirement income from a workplace retirement savings plan, an individual retirement account, and personal retirement savings and investments.
Outside of work, traditional savings accounts — including CDs, mutual funds, stocks, bonds, and real estate — can also be used to save for retirement. There is no tax deduction when contributions are made, and no contribution limits.
Finally, life insurance can provide an opportunity to supplement retirement income from retirement plans and general savings. Life insurance can be useful to not only save for retirement — with the right structure, a life insurance policy can even grow retirement income on a tax-deferred basis.
Permanent life insurance — like universal life or indexed universal life — is designed to build money inside the policy (called "cash value.")
- Universal life insurance pays a set interest rate on any cash value that's built up within the policy. With universal life, there's generally flexibility1 when it comes to premium payments, death benefits and the policy's value. Your policy (if sufficient) can then be used for a variety of reasons — including retirement funds.2
- Indexed universal life insurance offers all the benefits of universal life, plus the potential for additional growth. Any premium paid above the IUL policy's fees, charges and expenses (known as the "net premium") builds up as cash value, and can grow through credited interest.
Different kinds of permanent life insurance build value in different ways, but the goal is always the same: to make money within the policy, and to use at least part of that money to fund retirement expenses. With clear benefits and a wide array of products and structures, chances are that life insurance can help you save for retirement.