Many life insurance policies have been sold as backup retirement plans. That is, you put money into permanent, or cash value, life insurance and let the investment account build up. After holding the policy for a number of years, you can take tax-free policy loans and withdrawals to provide supplementary retirement income.
The problem with such strategies, though, is that arranging for policy loans and withdrawals can be a hassle. Fortunately, some companies are trying to make things easier for consumers. If you’re in this situation, ask the company if money can be transferred from an insurance policy to another account automatically, on a regular schedule. Also ask whether the insurer will help you to avoid taking too much from the policy, which would force the policy to lapse and trigger back taxes.
