Many people don’t know (and probably don’t care) that September is Life Insurance Awareness Month. It’s the one month out of the year that life insurance gets its time in the sun. I want to share some alternate uses for life insurance that many advisors never share with their clients to pump up this incredible product.

1. The Roth Alternative 

The “Roth” IRA was created back in 1997, and it was set up to provide an individual with tax-free money during their retirement years. Employer-sponsored retirement plans (401k, 403b, 457b, etc.) also adopted the Roth feature. Currently, if you have an IRA or employer-sponsored retirement plan that has “Roth” in front of it, you’re contributing after-tax into that account. And, if you follow a few simple rules, you can receive your distributions tax-free during retirement.

A Roth IRA may not be suitable for everyone. Some drawbacks include: 1) if you earn too much money, you are not allowed to open one, and 2) the contribution amounts are limited (2026 limits – $7,500 if you’re under age 50, $8,600 if you’re 50 and over. Note: The limits are subject to change each year so depending on what year you’re reading this, please check with the IRS). Income limits don’t apply to employer-sponsored plans, and the contribution limits for employer-sponsored plans are higher than an IRA, but they still have a cap.

When a Roth IRA is not suitable, people may begin to search for another way to invest their money for retirement. They hope to receive tax-free money during their retirement years, they may want to consider a properly structured permanent life insurance policy.

2. Create Your Own “Bank” (I didn’t coin this concept of creating your own bank but you may have come across the concept on the internet. For years, it’s been used to market and sell permanent life insurance.)

You will not have to concern yourself with setting up a physical (or online) financial institution for starters. Also, for the sake of keeping things simple, this strategy involves you utilizing a properly structured permanent life insurance policy. Here are the primary reasons people consider creating their own “bank” or what some call the “family bank”:

1. The cash value may earn a better growth rate than any solution you would find at your financial institution (High-yield savings/checking or CD’s).
2. The growth, as well as distributions you take, are not taxed as long as a small amount of death benefit stays in force until you pass away
3. When you borrow money, your full cash value continues to grow inside the policy by earning interest or dividends, depending on the policy. (However, the available cash value is reduced by the loan amount and any accrued interest.)

For each of the alternate uses of life insurance I’ve shared with you, I highly recommend that you speak with a financial advisor or insurance agent. Once you connect with a financial advisor or agent, you will now be equipped with some good material to discuss at your next appointment.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Securities and investment advisory services offered through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with The #BuildWealth Movement®.

The #BuildWealth Movement® works tirelessly to help people Disrupt Generational Poverty® for their families and community.