retirement through insurance?

Question

A co-worker of mine was telling us about her grandmother who has a healthy retirement through some kind of bridging of her insurnace over the years. I wanted to hear more but I don't know her well enough to ask her to elaborate. Can anyone explain this to me?

Answer 1

It could be that she has a cash value life insurance product that is being converted, but more likely is that she has an annuity, which is a form of an insurance product.

In the US, an "annuity" generally refers to a deferred investment contract that, upon "annuitization," will make regular payments (e.g., on a monthly or annual basis) to a person (called the "annuitant") for a period certain, over one or more specified individuals' lifetimes, or over a combination of life and a period certain

http://en.wikipedia.org/wiki/Annuity_%28financial_contracts%29

Answer 2

this person most likely had some sort of whole life insurance product. if the company that she had the insurance with pays out dividends to their policyholders that money is accumulated at a tax deferred rate and she can either choose to take the money out in one lump sum or have payments given to her over a period of time. there are also custom whole life policies that allow you to stop making payments whenever you want and to choose when you want premiums paid to you. if you are looking into a policy for yourself i suggest contacting a mutual company such as new york life because they are not a stock company meaning they pay profits to eligible policy holders instead of stockholders.

Answer 3

Well, you can cash in term life insurance, or even sell the procedes of your life insurance for cash or regular payments. That might be it.

Generally speaking, holding life insurance for a long time - if you don't have any dependents who will really need it - as an investment vehicle isn't that great. Investing directly will get you higher returns.