Despite the new tax plan, many Americans are still looking for ways to save on taxes and increase income in retirement. The Roth IRA is one of the ways to do this, as it allows you to set aside after-tax income up to a specified amount each year, and both earnings on the account and withdrawals after age 59½ are tax-free.
If you set up a Roth IRA in your twenties or thirties and consistently put aside the $5,500 each year, compound interest will get you to your retirement goals with ease. There is, however, a catch.
There are income limits of $135,000 for single people and $199,000 for married couples. So, if you’re earning too much for a Roth IRA, consider a life insurance policy as part of your retirement strategy.
With a whole life or universal life policy, there is an insurance component providing a death benefit and another tax-advantaged cash-building component that earns interest that can be tapped into while you are alive. This is called the cash value. There are implications for taking a loan on the cash value of your policy, so before you do it, get all the facts. Talk to a certified advisor.
The tax advantages of this strategy are a big attraction. You can access the principal you’ve invested and the interest earned tax-free, as long as you adhere to all the guidelines for withdrawals and loans. The bottom line is that if you’re a high net-worth individual, adding life insurance to your retirement income planning is something you should consider.
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