You work hard for your money, so when you see your checks decline steadily due to all the taxes you have to pay, a part of you dies inside.
Now, sometimes if you’re lucky, you see this money back in tax refunds, but wouldn’t you love to just avoid the whole situation altogether with a tax free account you can use for retirement?
Well, if so, a permanent life insurance plan may be the tax relief you are looking for.
What kind of life insurance policies work for this?
With a whole, variable, index, or permanent life insurance policy, you can accumulate a cash value in your policy, from paying consistent premiums. Term life insurance policies don’t work for this because you are not able to take out living benefits with your policy, as term life insurance coverage only pays out with a death benefit. This option is only really helpful if you plan to take out money for retirement or future use, and you can receive living benefits to get the most of a tax-deferred life insurance account.
How does it work?
As mentioned earlier, you grow your account by paying off your premiums in a consistent manner. If you want more money to grow in your account and to accumulate a higher cash value, you can choose to pay higher premiums. Also, the insured also has the option to put more money into the account, knowing that it will not be taxed.
The money in these life insurance accounts, works similar to annuities, growing over time, and is never hindered by taxes because it is completely tax-deferred.
How To Use The Money
Now, if needed, you can take money out against your policy to use for retirement, or other needs.
When you go to take money out, you can take out a sum that will be tax-deferred. You can use that sum to pay for retirement needs, medical bills, anything you may need. You can even use it to pay your premiums if you need the money to stay up with your bills for a bit of time.
If you need to take more out of your account, you can take out policy loans from the account, which are also tax-deferred, and will be easier for you to pay back when you need.
However, with certain policies, you must be aware that if you begin to take out more loans against your policy, and fail to pay them back, you are actually taking money directly from your death benefit. So if you have a $100,000 policy, and you take out $20,000 in loans and fail to pay it back, your death benefits will only be $80,000 left in your account for your beneficiaries.
Make sure that you are still making smart choices to handle your money and don’t go overboard with the tax deferred loans from your policy, unless the sole reason for the account was to pay for retirement, and not to support your loved ones.
With the tax-deferred policy, you get the whole use of the money in your policy and avoid tax cuts that can take away thousands of dollars that you have rightfully earned.
Oh, and with your tax-deferred policy, your beneficiaries will be covered as well. With a tax-free life insurance policy, the beneficiaries of your account will receive the full sum of the benefit, without getting taxes taken out of it.
This means that the money you put into your account with your premiums is going to good use, and is not being thrown away in taxes.
Make the best choice and invest in a tax-deferred life insurance policy to support yourself and your family, and get the benefits your rightfully earned.