Corporate Retirement Strategy

Preparing for the Golden Years With a Corporate Retirement Strategy

For many, the pinnacle of years of work is the lure of retirement. A corporate retirement strategy is an innovative alternative that allows a business owner to increase retirement cash flow, tax-free. Does it sound interesting? Many small business owners seem to think so as corporate retirement insurance gives them the opportunity to access more resources, supplement retirement income, invest in new business ventures, and expend their current business.

Understanding Corporate Retirement Strategy

It is now time to understand why many are finding value in this form of insurance. For one, corporate retirement insurance provides a business with insurance protection and tax-free cash in the future.

Corporate retirement insurance provides life insurance to a key person that builds cash value over a period of time. Once it has accumulated in value, the person can pledge it in exchange of tax-free loans from a lender. It also provides a tax-free death benefit and tax-preferred cash accumulation benefits.

To begin the process, the company purchases a life insurance policy on a key person’s life. The company then proceeds to make payments on the policy thus beginning to accumulate in value. When it has done so, the company can approach the bank and offer the policy as security or collateral for a bank loan. The bank loan now stands as a credit line. Under a corporate retirement strategy, the interest expense of the loan can be deducted from taxable income, thus leading to tax savings. It can also allow the person to borrow an additional amount each year.

These funds are now at the key person’s control, and it is left to him to decide whether the money will be re-invested back into the company, used for expansion, or for new business. He can also use the money to provide himself and his family the retirement lifestyle he wishes.

When the policyholder dies, his estate can now stand as the collateral for their loan. With this exchange, the bank releases the life insurance policy they previously held as collateral, then the company can claim the policy’s tax-free death benefit. Dividends are distributed and the deceased’s shares can now be used to repay the outstanding loan balance.

Advantages of a Corporate Retirement Strategy

Many companies see value in a corporate retirement strategy. Not only do they provide essential life insurance to key people, it also gives the opportunity for additional funds.

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