Using a permanent life insurance policy to supplement your retirement income is a strategic financial strategy that blends the benefits of life insurance and retirement planning. Unlike traditional retirement vehicles like an IRA or 401(k), this concept utilizes one or more permanent policies to provide individuals with a tax-advantaged method for accumulating wealth while providing financial stability for their loved ones.
A retirement supplement with life insurance is typically funded with either whole life, indexed universal life, or variable universal life insurance. The policy provides both:
The potential cash value accumulation is a crucial part of the strategy, as it creates a source of potential income in retirement.
In a retirement supplement strategy, individuals make premium payments to fund the policy to its maximum allowable limit.
Compared to a term life insurance, which covers you for a set period, permanent life insurance is designed to remain in force for life. If you’ve taken income from the policy, it’s important to keep it in force until death, because if it lapses and you’ve withdrawn more than your cost basis, any gain could be taxed as income.
The policy’s cash value can be accessed through withdrawals (up to your cost basis) or policy loans. These funds can be used for supplemental retirement income, often without increasing taxable income, if the policy is properly structured and maintained.1
This strategy may be a good fit for those who:
James Cole is 45 years old with a wife and three children. He currently makes about $240K a year, is in a 32% tax bracket, and is concerned about funding his retirement. He’d like at least 80% of his salary as retirement income, and estimates that by the time he retires at age 67, his salary will be about $300K. So he’ll need about $238K as retirement income. He is funding his 401(k) with $22,000 a year, but started saving late, so he only has $350K in there right now. Assuming it earns 5.5% interest annually, it may be worth about $2.2M at retirement. But if James takes $238K out annually for income, the 401(k) could run out of money when he is 80 years old.
James wants to make sure he has income that will last him all the way to age 90. So, his financial representative suggests that he use a whole life policy as a fallback should his 401(k) run out of money, a whole life policy with a face amount of about $700K and a premium of about $31K. At age 80,that policy could have enough cash value for James to make up the difference. Since the $238K from the 401(k) is fully taxable, but life insurance loans and withdrawals up to basis are generally income tax-free, James would only have to withdraw $162K to get the same after-tax income. At age 80, he can withdraw the shortfall amount of $92K so that his total income for that year, including the $95K left in the 401(k), will be $162K after-tax. Then, he can withdraw $162K from age 81 to age 90.2
This is not about replacing your retirement accounts. It’s about building in flexibility and security so you can retire with more options, not just more assets.
Advisors looking to implement a retirement supplement strategy using life insurance need more than just a product—they need flexibility, speed, and professional guidance. That’s where working with a brokerage like mine can make the difference.
Here’s how Milo Markovic can help:
✔ Access to Multiple Carriers – Work with a wide range of top-rated insurance companies to match the right product to each client’s needs.
✔ Streamlined Process – From application to policy issue, everything is handled digitally with my personal oversight to keep things moving and avoid delays.
All scenarios and names mentioned herein are purely fictional and have been created solely for educational purposes. Any resemblance to existing situations, persons or fictional characters is confidential. The information presented should not be used as the basis for any specific investment advice.
✔ Better Client Experience – Clear, simple communication with easy sharing of illustrations, option reviews, and status updates so everyone stays on the same page.
✔ Built for Remote Collaboration – I work with producers across the country, providing real-time support wherever you are.
✔ Underwriting and Case Design Support – Assistance with medical records, cover letters, and product comparisons so each case is set up for success from the start.
Want to explore how this strategy might work for your client—or your practice? Fill out the form below and let’s design the right approach.
Tracking Number 8264058.1
The primary feature of whole life insurance is the death benefit. All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims-paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
Milorad Markovic is a Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. True Wealth Strategies LLC is not an affiliate or subsidiary of Guardian. CA Insurnace License 4205864.
1. Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy's third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.
2 All scenarios and names mentioned herein are purely fictional and have been created solely for educational purposes. Any resemblance to existing situations, persons or fictional characters is confidential. The information presented should not be used as the basis for any specific investment advice.
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