Tax Free Income

What is it?

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Is it actually possible to generate tax free income? Indeed, it is. Of course, you can reduce your  overall tax liability by seeking proper tax advice from a qualified professional. However, there are many options for retirees to consider. For example, you may be able to withdraw your Roth IRA or certain Roth 401(k) funds tax free.* Also, depending on how you’ve planned your estate, there may be additional tax strategies available, too. In fact, even max cash value life insurance may offer a way to generate tax free income.*

You may be wondering...

Income From Life Insurance? How Does That Work?

The basic premise of life insurance is well-known. Essentially, you buy life insurance so your loved ones will have and income when you pass on. In this way, you can feel peace of mind in knowing that your beneficiaries are taken care of. However, there is another way to use life insurance for your benefit. Instead of simply paying a death benefit, you may be able to use max value life insurance to give you an income in retirement.

First, you can use life insurance as part of your overall savings strategy. In fact, you may be able to make these funds available for emergencies. Or, you may be able to access the money for college expenses or major purchases. If you use your life insurance balance instead of your retirement savings, it may give you flexibility in your strategy. By learning all your insurance options, you may find that life insurance plays a role in your retirement.

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How To Get Tax Free* Income

Because each situation is unique, not all retirees will decide to use life insurance as a vehicle for income. However, there are many cases where this option may work well. Life insurance may be a good tax free* income option for you if any of these situations apply to you:

  • Your retirement plan, such as 401(k), IRA or others have the maximum contributions in them
  • You have interest in tax deferral strategies for your retirement
  • You like the idea of having money available “just in case” a need arises
  • Protecting your source of income is important to you
  • A special needs child or family member needs the income when you pass away
  • Peace of mind in knowing funds are there if you need them
  • Looking for a secure income in case the market drops
  • The “cost basis” of your life insurance cash value is more than the income you need

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Can Your Heirs Receive Tax Free* Income Too?

Life insurance gives you the freedom to leave a legacy. The money is in an insurance policy, so the laws related to taxes differ from laws related to other types of accounts. For example, with life insurance, your beneficiaries get the money without taxes. Your savings has been hard-earned so you could protect your family. With the right type of life insurance policy, you can make sure that happens.

Find Out If Tax Free* Income Is Right For You

Choules Financial is sincere about making sure our clients know what’s possible for them in retirement. Life insurance may be an important aspect of this for you. Call us today for a complimentary review of your policy and your retirement accounts. We can go over your options, and make suggestions. Protect your legacy and your family. We believe you’ve worked hard to earn your money and now is the time to protect it.

*Proceeds from an insurance policy are generally income-tax-free, and if properly structured, may also be free from estate tax. Income-tax-free distributions are achieved by withdrawing to the cost basis (premiums paid), then using policy loans. Loans and withdrawals may generate an income tax liability, reduce available cash value, and reduce the death benefit, or cause the policy to lapse. This assumes the policy qualifies as life insurance and is not a modified endowment contract. The Host and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. This content is not intended to serve as the basis for any investment or purchasing decisions, nor does it recommend or involve the purchase, holding, or sale of a security.  All figures herein are hypothetical and for illustrative purposes only to explain general concepts.  No figure is to be relied upon as being accurate nor a guarantee or projection and is meant only as a partial overview of some relevant features and benefits of general insurance products that may be in the marketplace, and whose availability will be dependent on the State of residence of the consumer, and their individual suitability for the product they are wanting to purchase. Where insurance products are mentioned, any and all guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

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