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Many people have insufficient retirement packages through their employer and will not be offered any financial security in their retirement age. There are also many people who have no retirement packages and will be living solely on social security benefits. Social security offers very little security and most people forced to live off of it are finding it difficult to even keep their homes let alone pay for health care and enjoy their retirement.

A life insurance policy means to most people a way to pay out to loved ones after death. A life insurance policy can be much more than death benefits, its can offer a retirement package that is tax free payments after you retire. You can fund these policies with stocks and bonds, certificates of deposit, mutual funds as well as cash you have saved in your bank account.

It is important to have a policy that pays your loved ones in the event of your death, but what about while you are living? The benefit to the life insurance policies that offer retirement packages is that you are able to receive payments from the policy that will not be counted as income from the government. The policies are designed to pay an income for a certain time frame or they can be customized to pay you until you pass away.

The benefits packages can be treated different ways. Borrowing cash from the policy or having annual payments made are two of the most common methods and both have their ups and downs.

Money that is accumulated in the policy that offers retirement benefits is available for you or withdraw without suffering any penalties or taxes. A standard retirement package such as IRA benefits allows you to withdraw the money to but you suffer penalties for early withdraw as well as income tax on all finds you receive from the account. The insurance policy making payments to you that are tax free after you retire is a huge advantage it has over the standard retirement benefit package.

If you are borrowing cash from the retirement policy as a method to avoid having to pay any taxes on the money you may be surprised that you could be hit with capital gains tax on any payments that aware in excess of the premium, this is for the lifetime of the policy so if you paid over for 40 years you can expect a huge penalty. If you are now 80 or 85 and are trying to just get by with paying estate taxes and pay the high cost of health care this tax could put you in the poor house and cause you to lose everything you own trying to pay it back.

Your agent may have shown you a wonderful retirement package that was based on the rate that you received when you purchased the policy. The rates are subject to change and this will affect your retirement policy as well, meaning rates go up you travel the Mediterranean after retirement, they go down you are living in a trailer eating TV dinners every night. But with the security of the standard retirement package comes taxable income and lower payments and the insurance policy offers higher payments and tax free benefits but the risk may be slightly higher on your money.

Graham McKenzie is the content syndication coordinator a leading South African Life Insurance and Life Cover portal. For tips on how to save on your life insurance visit our website.