It is a common misnomer that the loan from the cash value in a whole life insurance policy allows for a tax free retirement. In fact, this "tax free" retirement is not only invalid but in addition comes at a great price.
In order to keep this "tax free" retirement, one is forced to pay the high cost of whole life insurance. At money.cnn.com, you will see the following words: "Whole life is expensive." In fact, many third party consumer advocates state the same thing.
Now, let's really look into this "tax free" retirement. What is terrible about this concept is that you put after tax money into the whole life insurance policy and then if you decide to stop paying for insurance and surrender the policy, you will be hit with taxes on the gains (eventually).
On the other hand, you have the option to keep paying the premiums, which get extremely expensive and end up eating all of your cash value. Doesn't it make sense for the whole life insurance company to offer you a loan to dig you even deeper into a ditch? Doesn't a loan have to be paid back?
The list of issues with whole life goes on and on. Keep reading here. Thanks for visiting. We appreciate your interest!
This post was reposted from http://finlit.biz/life-insurance/does-the-loan-on-a-whole-life-insurance-policy-constitute-tax-free-retirement/, originally written on January 23rd, 2013.
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