Taxes & Insurance

You can access a portion of your cash value without owing income tax.

With variable life insurance, a form of permanent (cash value) life insurance, you allocate your premium payments among subaccounts that resemble mutual funds. You enjoy tax-free buildup even if you move money from one subaccount to another. Typically, you’ll pay life insurance premiums periodically, which is a form of dollar-cost averaging.

If you enjoy strong subaccount performance you can maintain the same premium payments and see your cash value as well as the policy’s death benefits rise.

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Alternatively, you can trim premium payments in the future yet still sustain insurance coverage. Thus, variable life insurance permits you to capitalize on the stock market’s long-term growth. In addition, you’ll enjoy all the tax benefits of permanent life insurance:

There’s no income tax on investment income inside the policy. You can access a portion of your cash value without owing income tax. When you want the money in your policy’s cash value you can take tax-free withdrawals until you reach the amount of the money you’ve paid in premiums. After that point, you can take tax-free policy loans.

There will be a substantial payout to your beneficiary after your death, free of income tax.

The bottom line is that variable life insurance can provide tax-free retirement income to you, as long as you tap the policy carefully, and an income tax-free death benefit to your loved ones.

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