Use Life Insurance To Secure Income For Life Without Losing Your Legacy

Life insurance replaces wealth (or income) when it creates wealth at the event of your death. Here's how you might use it to secure a riskless lifetime income without losing your legacy. If you count on income generated by your investments during your retirement, you must protect yourself from market downturns from which you can't recover. Generally you do this by investing in very low risk money instruments like Treasuries, municipal bonds, certificates of deposit (CDs) or even bank money market accounts. Unfortunately such secure investments yield low earnings. If you can live on these earnings, and whatever risk, worry, or hassles associated with owning such CD-type investments doesn't bother you, you'll have those investments to leave as a legacy to your children. Of course, those investments are also vulnerable to future claims such as Medicaid's claim for its long term care you may one day receive. As an alternative approach for income, you could cash in those very conservative investments to purchase an immediate life annuity. A fixed income annuity may offer you a better return on your investment. Besides that, you're monthly payments are only partially taxed. Most of it is an untaxed return of premium. But the taxed and untaxed portions, together, may give you significantly more per month after taxes than what you were collecting on those conservative low yield CDs and the like. And you'll receive those annuity payments for as long as you live. So now you have risk free income for life. But, despite the larger monthly payments ending up in your pocket from your immediate annuity and its assurance of a lifetime income, your death will stop all payments and leave no legacy for your beneficiaries. -Life insurance to the rescue: Life insurance can help solve the loss of legacy that getting an immediate annuity presents. You can use it to recreate all or a portion of the legacy you intended with your CD-type investments. You can do it one of two ways: * Take a portion of every annuity payment to pay life insurance premiums on your life, or * Take a portion of your investments to purchase paid up life insurance with the remainder going for purchasing your immediate life annuity. The amount of death benefit - or premiums you can afford- depends on a satisfactory annuity payment to supply your living needs. Ideally, it should be at least equal to the after tax income you'd received on your CD-type investments. Remember, too, that insurance products like life insurance and annuity payouts carry a certain amount of creditor protection that you're investment holding don't. Be sure to check out and compare all the options and prices before committing your money to any investment.