2. Life Insurance As a Good Asset
Most people have their retirement savings in IRAs and 401(k)s. But these are "bad" assets because they are tax-deferred rather than tax-exempt. The tax will have to be paid one day, usually at the time you need the money the most, creating a growing debt on these retirement savings. Also, the unknown, probably higher tax rate, makes long term financial planning difficult.
Replacing these "bad" assets over time with permanent life insurance turns these tax-deferred funds into tax-free savings. Anyone who plans retirement should begin a program of systematic IRA withdrawals to decrease their IRA balances and plow those funds into permanent life insurance. In this way, the increasing and uncertain tax debt will be paid off by paying the tax now at known tax rates, which are at historic lows right now, while income tax-free savings are growing in the permanent insurance policy.
In our next blog post, we will discuss life insurance as an investment, rather than an expense.