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, 82 percent saying they anticipate receiving retirement income from a workplace retirement savings plan, 67 percent from an individual retirement account, and 73 percent from personal retirement savings and investments1.
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.
Additionally, life insurance can be purchased not only for the death benefit protection, but to help supplement retirement income. 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 flexibility2 when it comes to premium payments, death benefits and the policy's value. Your accumulated Account Value can then be accessed through policy loans or withdrawals, in many cases without paying any income tax.3 This makes it an attractive vehicle for meeting intermediate goals such as education funding or long-term goals such as supplemental retirement income planning.
- 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, including to help supplement retirement, charges and expenses (known as the "net premium") builds up as cash value, and can grow through credited interest.
With clear benefits and a wide array of products and structures, life insurance could be a flexible solution to help supplement retirement income while still providing death benefit protection.