Author : Your Money

Generally, you need life insurance if other people depend on your income or if you have debt that will carry on after your death. However, the older you get, the more expensive life insurance becomes. That’s why the younger you are when you buy life insurance the better usually, especially if you can lock in a low rate. If you wait too long to purchase life insurance, not only is it more expensive, it can be harder to get the policy approved by an insurance underwriter. The right time to buy life insurance varies from person to person, depending on family and financial circumstances. If you want to purchase a permanent insurance policy with a cash value, you need to own it long enough for the cash value account to grow. If you get a term life policy, it’s only in place for a certain number of years and doesn’t include a cash value component, so the optimal time to purchase a policy may be different.

Life insurance provides financial support to surviving dependents or other beneficiaries after the death of an insured policyholder. Here are some examples of people who may need life insurance:

A tax-free retirement account or Section 7702 plan is funded through a permanent cash value life insurance policy. A TFRA is funded with after-tax dollars, similar to the way you’d fund a Roth IRA. Cash value in the policy grows tax-deferred and policy owners can take out tax-free loans from that cash value during their lifetime. The amount of cash value that accrues inside the policy can depend on the underlying investment strategy. Since TFRAs are not qualified plans, they’re not subject to the same tax rules as those plans. Instead, this is a retirement account where investments are tax-exempt. For example, there’s no 10% early withdrawal penalty to worry about if you need to take funds out of the policy prior to age 59 ½ as there would be with a 401(k) or IRA. Income generated by the policy is also tax-free. TFRA Requirements TFRAs can be used to plan for retirement alongside other qualified retirement plans but they can’t be commingled. For example, if you’re changing jobs and want to roll over your 401(k), you wouldn’t be able to do a direct rollover to the policy. You could, however, roll the funds over into your new employer’s 401(k) or into an IRA. Additionally, a TFRA is a long-term investment plan. It is required that you’re able to fund the account for at least three years, at a minimum. You also must let the income grow for seven to 10 years before withdrawing funds from the account. All rules for TFRA plans are governed by a contract, which is different from some plans like 401(k)s or 403(b) plans, which rules are governed by Congress.

A retirement plan is your preparation for a good life after you’re done working to pay the bills, or at least done working a full-time job. But it’s not all about money. The non-financial aspects include lifestyle choices such as how you want to spend your time in retirement and where you’ll live. A holistic approach to retirement planning considers all these areas. The goals for your retirement plan will change in focus over time: