You can enjoy tax-deferred growth and tax-free withdrawals from a universal life insurance plan. This can be a great way to supplement other retirement savings accounts, such as a Roth IRA. Life insurance has no income limits, and it allows you to contribute to the cash value of your policy, which can grow tax-deferred and in many cases, can provide tax-free distributions.
By overpaying your premiums, any extra money will go toward the account’s cash value. However, you’ll need to be cautious about not exceeding the annual premium limit, which is determined by the Internal Revenue Service. (Check with your tax advisor about this.)
Key Takeaway

Roth IRA vs. Universal Life Insurance
Because a Roth IRA is limited to $6,000 in contributions per year for someone under 50 years of age, if you’re making more than the above Roth income limits, $6,000 may not be enough to save anyway.
Unlike a Roth, the maximum amount you can pay into a universal life insurance plan is determined by factors such as your coverage amount, age, gender, and health status. Remember, if you exceed the maximum allowed by the tax code, your policy will turn into a Modified Endowment Contract (MEC), which may impact your ability to take tax-free withdrawals from the policy.
Another benefit of universal life insurance is being able to access the cash value of your policy. You can even access money before retirement. (You’ll need to inquire about any fees or policy surrender charges that might accompany a withdrawal and find out how the death benefit will be affected.)
Either a Roth IRA or universal life insurance can be used to grow your money tax-deferred, and most cases, provide a worry-free, tax-free way to access your money in retirement. A huge benefit of life insurance cash value is that you can access it before age 59 ½. If you should ever need nursing home care, or need to cover some other long-term care or medical costs when you’re older, you can tap into the cash value of your life insurance tax free.
Using universal life insurance as another tool for retirement savings can be a good idea, especially if you’ve maxed out contribution limits to other retirement accounts, such as a Roth IRA or a 401k.
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