How life insurance can help you find balance in retirement

Preserve your legacy and prepare for the unexpected while enjoying your retirement years.

Many people forgo things they’d really like to experience in retirement because they’re focused on being able to leave something to the people or causes important to them. Or they may be concerned about needing to use retirement savings to cover an unplanned expense. A possible solution to these concerns could come from a tool that you’re already familiar with—life insurance.

A permanent life insurance policy may help protect the legacy you’ve created for loved ones or support a charitable cause that’s important to you. Additionally, purchasing that policy with a lump-sum payment may give you the opportunity to access the cash value to pay for the unexpected, such as unplanned medical expenses for you or a loved one, while you’re still alive.*

Whether you’re trying to protect your legacy or want to feel more prepared to manage unexpected expenses, life insurance may help do those things while allowing you to live the life you want today and enjoy your years in retirement.

How life insurance can help you find balance in retirement

What kind of legacy do you want to leave?

Most people know you can use life insurance to help replace lost income and cover burial or other final expenses related to your passing. What if you want to leave a legacy in other ways?

The death benefit from your life insurance policy can fund more than just income replacement or expenses related to your passing. A death benefit is typically guaranteed, as long as the policy has adequate cash value. It can provide a solid base for your legacy, which allows you to enjoy your retirement years without worrying about what may be left for your beneficiaries.

Talk to your advisor about your goals for transferring wealth to family or other recipients and see how life insurance may be able to play a role. Here are a few ideas that might inspire you:

  • Helping fund a child’s or grandchild’s education
  • Donating to a favorite charity (possibly at a fraction of the cost of providing a lump-sum contribution because you’re donating dollars that have grown tax free)
  • Equitably supporting the transfer of a family-owned business or property

A life insurance policy may be a source you can consider to help cover the unexpected.

Nearly half of respondents cite the possibility of unexpected expenses including major medical expenses, significant cuts to social programs, market decline, and an increase in inflation, as the most significant detractors to feeling financially confident.

Source: TIAA 2019 Lifetime Income Survey for sourcing and compliance purposes, go to pdf in new window

How a lump-sum purchase may protect you from unexpected expenses

What if something unexpected happened or what if you were asked to help care for an aging relative?

Your advisor can help you review several options that can help you cover the unexpected, and life insurance may be a part of that conversation.

Unlike term insurance, a permanent life insurance policy has the potential to accumulate a cash value that can grow tax deferred and potentially tax free over time. You can access your policy’s cash value through full or partial withdrawals or by taking out a low-interest rate loan against your policy. If you pay it back, with interest, the death benefit associated with your policy may not even decrease.

Typically, if you make annual premium payments to fund your life insurance policy, the cash value takes time to build up, so you may not be able to access it right away. If you make a lump-sum payment for the policy, however, you may be able to access the cash value sooner.*

Think about the "do not touch" money you have set aside. Could you put it to better use funding a life insurance policy that may still allow you access to it while also potentially providing a death benefit? Or, if you’re getting ready to start receiving required minimum distributions (RMDs) from your retirement accounts but already have significant savings, would using the RMDs to fund a policy help you achieve other goals?

4 easy steps for purchasing permanent life insurance

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Talk with your advisor to see how life insurance can play a role in your financial goals.

Complete and submit your application.

Fulfill any medical requirements, which will include a brief exam.

Following approval, review your final cost.

Understand your options

Permanent life insurance can provide you with the versatility to make financial adjustments as your situation changes. Your advisor can help you understand all your options and how life insurance could fit into your overall financial plan to help you achieve your goals.

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* If the policy is classified as a Modified Endowment Contract (MEC) under IRS rules, distributions are generally subject to income taxes and, if before age 59 1/2, a federal tax penalty. See your tax advisor for details.

The TIAA group of companies does not provide tax or legal advice. Tax and other laws are subject to change, either prospectively or retroactively. Individuals should consult with a qualified independent tax advisor, CPA and/or attorney for specific advice based on the individual’s personal circumstances. Examples included in this article, if any, are hypothetical and for illustrative purposes only.

Life insurance policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force. A life insurance representative can provide you with costs and complete details.

This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances.

Advisory services provided by Advice & Planning Services, a division of TIAA CREF Individual & Institutional Services, LLC, a registered investment advisor.