Learn and Plan | Life insurance as part of retirement planning
An older couple works with a life insurance agent to help with a retirement plan

Life insurance as part of retirement planning

Jul 1, 2022, 2:38:25 PM | Reading Time: 3 minutes

When it comes to retirement, the value of permanent life insurance isn’t always considered. By having the right life insurance coverage when you retire, you can make it easier for your family to handle finances when you die. Coverage from a permanent life insurance policy can also help protect your money, manage your taxes and give you the opportunity to grow cash value which you can use for a variety of needs and activities.

Can I use life insurance for retirement?

The main purpose of life insurance is a death benefit that can be used to protect your beneficiaries if you unexpectedly pass, but it can also offer additional benefits. For instance, permanent life insurance can help with your retirement planning. Maybe you’re closing the gap to retirement, but your account is not quite where you want it to be. With the help of a financial professional, you can determine if life insurance can help supplement your retirement income down the road.

How do I use life insurance for retirement?

Generally, here is how a typical permanent life insurance policy could help you plan for retirement.

Permanent life insurance

Permanent life insurance differs from the term death benefit protection and has the potential to build cash value that can be used to help supplement your retirement income. An interesting aspect of permanent life insurance is the ability to access cash value through the use of a policy loan1 is generally tax-free.2 This can offer:


What about if you need money before you reach retirement age? There’s no age requirement to use a policy loan from your life insurance. Policy loan funds from your life insurance policy can be used for any purpose and it is generally free from income taxes.

Lower tax burden during retirement

If you use the cash value from your life insurance policy to help supplement your retirement income, you might be able to reduce the amount you withdraw from your retirement accounts. During retirement, withdrawals from these accounts are generally taxable as regular income. Taking income from both your retirement accounts and your life insurance policy could help keep you in a lower tax bracket. Midland National has life insurance products that can be the cornerstone of your overall financial plan. To find out more about how permanent life insurance can help supplement your retirement planning options, contact a Midland National financial professional. Want to learn more? Check out this video about how life insurance can help with retirement planning.



1.Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract (MEC), as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a MEC is taxable upon receipt to the extent cash value of the contract exceeds premium paid. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. Policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges. Consult with and rely on your tax advisor or attorney on your specific situation.

2.Neither Midland National Life Insurance Company nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements. The tax-deferred feature of the universal life policy is not necessary for a tax-qualified plan. In such instances, you should consider whether other features, such as the death benefit and optional riders make the policy appropriate for your needs. Before purchasing a policy, you should obtain competent tax advice both as to the tax treatment of the policy and the suitability of the product.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

Life insurance policies have terms under which the policy may be continued in force or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. For costs and complete details, refer to the policy or call or write Midland National Life Insurance Company at One Sammons Plaza Sioux Falls, SD 57193. Telephone 800-923-3223.


REV 4/2021