If you (or your parents) have a whole life insurance policy, you can include it in your plans for retirement income. In fact, tapping your insurance policy may help you keep your other assets intact: you won’t have to sell stocks for living expenses while the stock market is down.
A whole life policy generally is much more expensive than a term life policy. That’s because the policy is designed to stay in force as you grow older, when term life insurance would become more expensive.
With most whole life policies you get guaranteed cash values and the potential for additional cash value, paid for with policy dividends. Because of the guarantees, whole life cash values can provide a stable source of income that is not impacted by stock market volatility.
Once you have had a whole life policy for many years and sufficient cash value has accumulated, you can tap the cash value via policy loans and withdrawals. If you borrow or withdraw in moderation, you can avoid income tax on the money you receive. (Such loans and withdrawals will reduce the policy’s death benefit, though.)
While you are using life insurance to help pay the bills in retirement, you can provide your stocks with time to recover. Eventually, you can resume drawing down your investment portfolio for retirement expenses.
