Life insurance is a post-tax asset. This means you pay taxes before putting money into a cash value insurance policy. There are some very important reasons why paying taxes while you are working is much more beneficial. You can read more about this in our “10-Minute Retirement Guide.” Indexed Annuities also offer a place to defer tax, or keep money tax-deferred, if it makes sense.
However, the benefit of cash value life insurance is that, once you pay your tax, you can avoid taxes indefinitely on any of the growth you experience inside of the policy. This means that life insurance growth will never be taxed if setup and executed properly by a professional. This can save you money in the long run that would have normally been paid in taxes.
Also, when you die, life insurance death benefit transfers income-tax free. This way, you are able to leave a legacy to your heirs without major tax implications.