When choosing where to set aside money for retirement, you need to weigh your options carefully. You’re likely going from one main income source to multiple smaller income sources when you retire. You may also want buy some security for your family in case you die unexpectedly. Sometimes, those two goals can be in conflict with one another, meaning you’ll have to figure out how to achieve them both. One way this can be achieved is using a combination of a life insurance policy and a Roth IRA. Let’s look at how those two products work and how you can use them.
Life insurance and Roth IRAs are two different products. One is a policy you pay for in exchange for a payout when you die. The other is an investment account in which you can stow away money that will grow with the market tax-free. Each has its pros and cons, with its own unique reasons for investing.
Life Insurance Pros and Cons
Life insurance works like any other insurance product. You pay a premium up front in exchange for a payment when needed — in this case, a payment to your family after you die. The cost of that premium will depend on many factors, such as your health and the type of coverage you sign up for. The money your family gets will be tax-free and can be used for funeral costs, estate taxes and other financial burdens.
There are some downsides to life insurance. First of all, premiums are expensive. Adults over the age of 55 can expect to pay more than $1,000 per month