Combining Annuities and Life Insurance

While retirement funds vary from person to person, experts recommend saving 10% to 15% of your pre-tax income every year. Saving early allows you to build a substantial nest egg and grow your money in the long run.

A key part of preparing for your retirement is researching different financial products. Both annuities and life insurance are the most common options you can include in your retirement strategy. Combining annuities and life insurance can be one way to achieve financial peace of mind.

In this blog, we will discuss the investment strategy that combines an annuity with a life insurance policy. 

Difference Between Annuities and Life Insurance

An annuity is an investment contract between you and an insurance company. With an annuity, you can make either a lump sum or regular premiums. In exchange, the insurance company agrees to give you a guaranteed stream of income during your retirement. 

There are different types of annuities that you can choose to match your specific needs. Although annuities are commonly offered by life insurance companies, it's not technically considered a life insurance policy.

Meanwhile, life insurance is a type of insurance that pays out a sum of money when the policyholder dies. For the life insurance to stay in force, the policyholder needs to continue paying the premiums.

Why You Should Combine Annuities and Life Insurance

1. Death Benefit

When a death claim occurs, some annuities pay death benefits to the beneficiaries. However, note that not all annuities include a death benefit. Variable annuities and indexed annuities include a death benefit as part of their features. 

Upon the annuitant’s passing, the surviving spouse is entitled to the payments. If there is no surviving spouse, then the beneficiaries named in the annuity contract will receive the death benefits.

As for life insurance, one of its main purposes is to provide death benefits as a form of financial support. When the insured person dies, the beneficiaries will receive the policy’s face value.

Combining annuities and life insurance can provide an enhanced death benefit for the surviving family. This way, your beneficiaries will receive not only the death benefit from your insurance policy but also any remaining annuity value. With a larger payout, you can provide them with greater financial security for years to come.

2. Tax Advantages

Both annuities and life insurance policies offer tax benefits that help maximize your retirement savings. Annuities grow on a tax-deferred basis, which means there’s no need to pay taxes on your money while it’s in the account. pay taxes on earnings until you begin taking withdrawals. You’ll only pay taxes on the money when you begin taking withdrawals.

Likewise, life insurance payouts are generally tax-free. This means that the death benefit isn’t subject to income tax. When you combine annuities and life insurance, you can maximize tax efficiency and achieve your retirement goals.

3. Diversification of Your Portfolio

Financial experts always say that you shouldn’t put all your eggs in one basket. Diversification is a technique for spreading investments and managing risks. Having a variety of investments helps balance out your portfolio.

Investing in annuities and life insurance diversifies your retirement portfolio. This allows you to protect your retirement savings from risks and market fluctuations.

4. Guaranteed Retirement Income

As you might already know, annuities provide a reliable, guaranteed source of retirement income. Depending on your contract with the insurance company, your annuities can give a fixed monthly income regardless of the market's performance.

When it comes to life insurance, there’s a cash value portion that you can withdraw or borrow against. The cash value earns interest over time, which can complement your existing retirement savings. 

By integrating annuities and life insurance, you can protect your retirement income and ensure that you’re financially protected. This also allows you to leave a legacy for your loved ones.

Work With a Licensed Insurance Agent

Your retirement years should be your best years in life. At Local Retirement Group, we are experts in life insurance policies and annuities. Our team can guide you and ensure that your retirement will be a financially comfortable one. 

If you need help with retirement planning or anything related to insurance, we have you covered. We’ll assess your financial situation and introduce you to various options. Give us a call today for more details. We look forward to serving your financial needs!