• Are you aware of this retirement option?

  • Jun 26 2023
  • Length: 11 mins
  • Podcast

Are you aware of this retirement option?

  • Summary

  • Life insurance that can be transferred to an annuity is called a life insurance annuity. It is a type of life insurance policy that allows the policyholder to convert a portion of the death benefit into an annuity. The annuity will then pay out a regular income stream to the policyholder during their lifetime.

    There are two main types of life insurance annuities:

    • Immediate annuities start paying out income immediately, either as a lump sum or in regular payments.
    • Deferred annuities do not start paying out income until a later date, such as retirement.

    Life insurance annuities can offer a number of benefits, including:

    • Tax-deferred growth: The cash value of a life insurance annuity grows tax-deferred, meaning that the policyholder does not have to pay taxes on the investment earnings until they start receiving income from the annuity.
    • Regular income stream: A life insurance annuity can provide a guaranteed income stream for the policyholder during their lifetime.
    • Death benefit: In the event of the policyholder's death, the death benefit will be paid out to the beneficiaries.

    However, there are also some potential drawbacks to life insurance annuities, including:

    • High fees: Life insurance annuities can have high fees, which can eat into the investment earnings.
    • Surrender charges: If the policyholder surrenders the annuity early, they may have to pay surrender charges.
    • Complexities: Life insurance annuities can be complex, and it is important to carefully read the terms and conditions before purchasing one.

    If you are considering a life insurance annuity, it is important to speak with a financial advisor to discuss your individual needs and circumstances. 

    Here are some of the factors to consider when deciding whether to transfer a life insurance policy to an annuity:

    • Your financial goals: What are your financial goals for retirement? Do you need a guaranteed income stream? Do you want to maximize your tax benefits?
    • Your age: If you are nearing retirement, you may want to consider converting your life insurance policy to an annuity to provide a guaranteed income stream.
    • Your health: If you are in good health, you may be able to get a higher annuity payout than if you are in poor health.
    • The fees: Be sure to compare the fees of different annuities before you make a decision.

    Are you getting what you want or are you putting yourselves in a position someone could try and get the better of you?

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    Telton W Hall, CFP® is a husband, father, retirement planning expert, small-town-boy at heart, nationally published author, sought-after speaker, former college basketball player, founder/owner/team member of Utah based Advanced Financial Planning LLC, hiking enthusiast, Jesus follower, business leader, team builder, and to the core Telton is an educator.

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