Supplementing Your Roth IRA With Insurance Investments

A Roth IRA is a great way to save for retirement, but one of its weaknesses is that it sets a limit on how much you can contribute per year. This limit can be a burden for hardworking professionals who are trying to ensure that they have a comfortable retirement, particularly those who may be late getting into the retirement savings game.



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Are your eggs all in one basket?


If you’re trying to save for retirement, it’s a good idea to put your eggs in several baskets to take advantage of options offered by various plans. While many folks save for retirement with a 401k plan, not every company offers a 401k option, and for some independent entrepreneurs, a 401k just doesn’t make sense.


Roth IRAs are good plans for many people saving for a comfortable retirement, but the plans have some rules that can hinder folks saving for retirement.  With a Roth IRA you can defer taxes on the income you contribute or pay the tax now and withdraw later tax free. It sounds good, and it is, but unfortunately the upper limit on what most people can contribute to a Roth IRA per year is set at $5,000 ($6,000). If you’re trying to play catch-up with your retirement saving because of divorce or other financial setbacks, this just isn’t enough.


In addition to contribution limits, Roth IRAs also have some pesky rules about when you can make withdrawals and other transactions. For example, you can’t access the account until after you’re 59 ½ and you can’t use it as collateral.


For a more flexible retirement savings option that can supplement your Roth IRA savings, consider an alternative retirement savings plan to supplement your Roth IRA. Many savvy investors are now using life insurance products with retirement savings vehicles to help supplement their Roth IRAs. These products have more liberal rules regarding contribution limits.


Any other way to do it?


There are a variety of great life insurance products that can help you save for retirement. Some provide a tax-free income stream for the remainder of your life. Equity index policies can help you grow your money with market investments without having to risk losing your principal.


While contributions to your plan aren’t tax-deferred like 401k plan contributions, saving tax money on the front end of your retirement saving isn’t a great strategy, anyway. Much of the tax savings you realize on the front end of a 401k plan will be lost once you begin withdrawing from the plan.


Flexibility is a key advantage of life insurance retirement savings vehicles, as you can use the contract as collateral for a loan and you may also be able to tap your life insurance retirement savings plan for cash should an emergency arise. Also, in the event of a disability, you may suspend payments into the plan.


If you’re saving for retirement and what to supplement a Roth IRA or are looking for another savings option, consult with a financial advisor who specializes in life insurance retirement savings plans to help set you up with a plan that works for your needs.


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