Plan For Tomorrow | How can a life insurance policy help with retirement planning?
A middle-aged woman works with a young agent on her retirement plan

How can a life insurance policy help with retirement planning?

Monday 12 April 2021 | Reading Time: 3 minutes

Buying the right life insurance coverage with your future retirement in mind can make it easier for your family to handle finances when you die. It can also help protect your money, manage your taxes and give you the opportunity to grow cash value which you can use for a variety of needs and activities. Here are some tips for using life insurance as part of your retirement planning.

Permanent life insurance

Permanent life insurance offers you a death benefit and the potential to build cash value that can be used to help supplement your retirement income. Perhaps one of the most interesting aspects of permanent life insurance is the ability to access the cash value generally tax-free through a policy loan.1,2 Why is tax-free so important?

Lower taxes during retirement

If you use the cash value from your life insurance policy to help supplement your retirement income, you might be able to reduce the amount you withdraw from your retirement accounts. During retirement, withdrawals from these accounts are generally taxable as regular income. Taking income from both your retirement accounts and your life insurance policy could help keep you in a lower tax bracket.


What about if you need money before you reach retirement age? There’s no age requirement to use a policy loan from your life insurance. Policy loan funds from your life insurance policy can be used for any purpose and it is generally free from income taxes. North American has life insurance products that can be a significant asset as part of your financial retirement strategy. To find out more about how permanent life insurance can help supplement your retirement planning options, meet with a North American agent today. Curious and want to learn more about life insurance and retirement planning? Check out this video.


1. Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract (MEC), as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a MEC is taxable upon receipt to the extent cash value of the contract exceeds premium paid. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. Policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges. Consult with and rely on your tax advisor or attorney on your specific situation.

2. Neither North American Company for Life and Health Insurance nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements. The tax-deferred feature of the universal life policy is not necessary for a tax-qualified plan. In such instances, you should consider whether other features, such as the death benefit and optional riders make the policy appropriate for your needs. Before purchasing a policy, you should obtain competent tax advice both as to the tax treatment of the policy and the suitability of the product.

Life insurance policies have terms under which the policy may be continued in force or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. For costs and complete details, refer to the policy or call or write North American Company for Life and Health Insurance at One Sammons Plaza, Sioux Falls, SD 57193. Telephone 877-872-0757.