by Greg Rakas

Created on: May 16, 2008

At this point in life, we are all quite familiar with 401k, Roth IRA's, Mutual Funds, and so on. All of those mentioned plans are beneficial towards retirement and should be one of the cornerstones to anyone's overall retirement plan, but they all carry significant tax hits from Uncle Sam. Wouldn't it be great to have a similar style investment that grows exponentially as you get older in life AND avoid the hefty tax surcharges that comes along with them? It actually exists! I'm not kidding, there is a plan where you can not only contribute meager monthly payments that grow later in life, but also not get taxed on them when it comes time to access those years of hard savings. Unfortunately, it is not a very well know plan, but if you can start early enough it will quickly become one of your favorite savings vessels towards your retirement.

"Enough of the pitch! Tell me what your talking about!" I was going to do that, but I have to get you excited about it first, it's an old sales technique. Anyways, without further adieu, one of the single most effective methods of allocating your resources to plan for retirement comes in the form of life insurance! And it's tax free, so later on in life when you want to access your $100k, you can get the full $100k and not the $70k that a 401k would get you because of its tax hits. It's the only plan available that has the benefit of being tax free. It is due to the nature of the policy attached to it.

Let's take the example of a $100k life insurance policy. It works like life insurance in that you have a beneficiary of the $100k. You will contribute $103 a month of which the majority of the money goes towards your cash value of the policy. The company that holds your policy will then invest that $103 a month into different portfolio investments. They pay the money back to you in the form of a yearly dividend, which you reinvest into the plan. As the years begin to build, the cash value and dividends accelerate past the $103 you put in on a monthly basis. Plus the death benefit grows coincidingly with it! (most people aren't too thrilled about it, as they need to be dead to reap the benefit)

A 24 year old that starts a $100k life insurance policy that retires at age 65 will be the proud recipient of $180,000 of tax free money while only spending $50,000 to get there! So if you now get a plan every other year until you're 31, you can have several of these plans lined up and cash them out as you need them while living off the monthly income of your 401ks, pensions, and social security payments.

If you haven't done so yet, go talk to your financial planner about a cash value life insurance annuity. Remember! If they advise you against it, it's most likely because it doesn't pay them a nice commission.

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