Permanent life insurance has similar benefits to a Roth IRA ... and that’s just a start

Permanent life insurance has similar benefits to a Roth IRA ... and that’s just a start

You may have heard of a Roth IRA as a good option for retirement planning with favorable tax treatment that allows after-tax contributions, tax-deferred growth, and tax-free distributions at retirement. The drawback? A Roth IRA is not available for everyone and has limits to how much you can contribute.

You may get features similar to a Roth IRA (along with additional benefits) from another vehicle: permanent life insurance.

Take a closer look at how permanent life can differ from a Roth IRA:

Eligibility

Life insurance doesn’t have income limitations like a Roth IRA. A married couple filing jointly with income of $203,000 (for 2019) or above can’t directly contribute to a Roth IRA.1

Contributions

Roth IRA annual contribution limits are $6,000 ($7,000 if you're age 50 or older).1 Life insurance policies can be structured to accept much more than $7,000 in annual premiums, which can help if you’re trying to catch up and build savings before you retire.

Volatility

Roth IRA contributions may be subject to market risk depending on the investment options you selected. If the markets are down, your Roth IRA values could go down, too. You can own permanent life insurance policies that never decrease in value and are not subject to market volatility.

Protection

Life insurance provides a tax-free death benefit many times the size of the annual premium. This important feature provides financial assistance during a difficult time for your family and may provide additional funds to assist with the dreams you have for them.

Distributions

There are restrictions on when and how you can get earnings out of a Roth IRA. With life insurance cash value, you can access your available policy values when you need them, without penalty.

Next steps

This is just the start! Whether paired with, or as an alternative to, a Roth IRA, permanent life insurance can help provide protection, flexibility and potential for your retirement. Talk to your financial professional to see if permanent life insurance should be part of your overall financial strategy.

IRS.gov, Publication 590-A (2019), Contributions to Individual Retirement Arrangements (IRAs), 9/2020.
2 IRS.gov, Retirement Topics - IRA Contribution Limits, 9/2020.

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The purchase of a whole life insurance policy is a long-term commitment and is subject to underwriting approval. During the first several years, both the guaranteed and non-guaranteed cash value of a whole life insurance policy is typically less than the premiums paid. If a whole life insurance policy is surrendered, its surrender value will not always exceed the total premiums paid. Before purchasing any whole life insurance policy, you should request a policy illustration and carefully compare both the guaranteed and non-guaranteed elements.

Life insurance cash values grow without being subject to current taxation. Cash values can be accessed by way of policy loans without being subject to taxation. However, if tax-free loans are taken and the policy lapses, a taxable event may occur. Withdrawals (partial surrenders) and loans from life insurance policies classified as modified endowment contracts may be subject to tax at the time the withdrawal or loan is taken and, if taken prior to age 59½, a 10% federal tax penalty may apply. Withdrawals and loans reduce the death benefit and cash surrender value. Always consult with a tax advisor regarding your particular situation.

Whole life insurance is issued by The Ohio National Life Insurance Company. Guarantees are based on the claims-paying ability of the issuer. Dividends are not guaranteed. Products, product features, and rider availability vary by state. The issuer is not licensed to conduct business in New York.

THIS MATERIAL IS FOR USE WITH THE GENERAL PUBLIC AND IS NOT INTENDED TO PROVIDE INVESTMENT, INSURANCE OR TAX ADVICE FOR ANY INDIVIDUAL.

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