Life Insurance

For Retirement

Life Insurance For Retirement

Choosing the right life insurance policy for your retirement is important. With the right one, you may be able to retire tax-free.*

How Does Life Insurance For Retirement Work

People often overlook the importance of life insurance when developing their future retirement strategy. Most people only know the most basic purpose of life insurance: You can purchase it to provide a death benefit to your beneficiaries. A lot of people are unaware that you can actually use life insurance to provide income while you’re still alive.

Some life insurance products can provide you with tax-free* retirement income.

This is because insurance products don’t apply to the same tax rules as traditional retirement accounts. They may also grant you more flexibility compared to other retirement options.


One example of a life insurance product you could use as a form of savings? An IUL. An IUL (or indexed universal life) insurance policy may be used as a safe place to keep additional money. For example, money to be used in the event of an emergency, or for big purchases in the future. Using the money in an IUL instead of the money in your retirement accounts for these things may come with tax advantages. Of course, the implications of this may vary. So, be sure to reach out to us for more information.

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Tax-Free* Retirement?

Does a tax-free* retirement event exist? Yes, it is possible,* with the right strategy. An IUL policy could be a way to achieve this. They allow access to your cash value, without being taxed.* Additionally, the death benefit to your beneficiary may also be tax-free.*

senior woman with dog life insurance for retirement santa rosa ca

Types of Life Insurance

There are several kinds of life insurance policies you can choose from. One option, term life insurance, is only paid as a death benefit if pass away within the term laid out in the policy. However, it holds no additional value. Another type of life insurance for retirement is a max-funded cash value life insurance policy. Most often, this type offers more flexibility than others. Some of these products will permit you to remove money from the cash value created. You can withdraw it tax-free* because the cash value is technically just an overpayment of life insurance. Furthermore, some policies will allow you to borrow against your cash value. In this case, the money received is a loan, meaning you can also collect it tax-free.*


IULs are an additional category of life insurance products. An IUL can provide more flexibility and more benefits than a whole or term life insurance policy.


Retirees who use an IUL as part of their strategy have the potential to receive a number of benefits.

In Retirement

The following benefits can help you during your retirement years:

  • You can protect your cash value, even in a down market
  • The potential for tax-free* income
  • Principal and interest are available, tax-free*
  • A stock market index affords you with a potential for cash value growth
  • Potential for choice of the number of indexes you want for your IUL
  • You may be able to lock in potential gains
  • No excess fees for pulling money out before age 59½
  • Flexibility to fund all at once or slowly over time

Legacy Benefits

After your death, the benefits provided to your beneficiaries may include:

  • The death benefit may be higher than the premium payments you make
  • Tax-free* death benefit
  • Death Benefit can increase over time
  • The benefit can be paid over time, or as a lump-sum
  • No probate court: the money goes directly to who you want to receive it
  • The potential option for using some of the death benefit for chronic or terminal illness
couple meeting with financial advisor to discuss life insurance for retirement santa rosa ca

How Life Insurance For Retirement May Help You

An IUL policy is not necessarily appropriate for all retirees. There may be a better option for you, depending upon your individual situation and your needs. But, an IUL may be the best choice in some situations. They are an excellent tax-free* income alternative, if any of the following situations apply to you:

  • You have maxed your 401(k), IRA, or another plan
  • You are interested in tax-deferred or tax-free* strategies
  • Income security is important to you
  • Stable income is important to you
  • You like the notion of being able to withdraw cash whenever you need it
  • You’d like to have effortless access to some of your funds
  • The income amount needed is less than your life insurance’s “cost basis”
  • As a parent of a special needs adult child, you may want income for your child

Sonoma Financial is committed to ensuring our clients are educated on all their possible retirement options. Contact us to schedule an appointment, where we can give you more information and answer your questions about life insurance in retirement. We will review your current strategy, and make recommendations depending on your specific situation.

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