Short YouTube transcript (by Chris Larsen) arguing that the tax code incentivizes life insurance ownership: premiums are paid after-tax, cash value grows tax-deferred, and retirees can access funds via policy loans tax-free while accruing a loan that is ultimately repaid by the death benefit, which is income tax-free.
It's tax free income. How does that work? The tax code is built to incentivize people to do things that the government thinks would be smart for us to do. Yeah, well, one of those things is life insurance. You know your friend, right. If they didn't have insurance or yourself when you were young and if you guys didn't have insurance, the difference is poverty. Well, the government would rather not have people in poverty, so they incentivize people to have life insurance. And one of those things is in the tax code. They say money that you put into the plan is after tax. Once it's there, it grows what you call tax deferred. Then when you access the money. We've talked about using loans to go and invest. Well, loans aren't taxable. We do something similar. When you're in retirement, you can access the funds without paying any tax and you'll build up a loan. Right. In this case, now, I'm not making any payments on the loan because I'm living off that money. Right? Right. So I let the loan accrue. When I die, there will be a loan balance that gets paid off. But guess what? It gets paid off with the death benefit. And the death benefit is income tax free.
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