Cashing in a life insurance policy
Since we no longer need my husbands life insurance policy we will be taking it’s cash value of $190,000. this year. Appoximately $95,000. is subject to the long term gains tax. Other than an annuity, is there another investment vehicle that would reduce or delay the tax obligation? Our current plan is to deposit the money in a savings account (American Express) with an interest rate just above 3%. We are ages 76 and 77 and do not need to use these funds for living expenses.
Thank you, Terry. I really enjoy listening to you on WGN radio every Wednesday!
Terry Says
WAIT! Do you know this will add to your income and could substantially increase your Medicare Part B premiums!!!
Check this chart of IRMAA additional Medicare premiums:
https://www.kiplinger.com/retirement/medicare/medicare-premiums-2026-irmaa-brackets-and-surcharges-for-parts-b-and-d
It may take a year for them to catch up with you– but they will. And then it’s tough to get those premiums reduced, even though the income bump lasted only one year.
There may be better alternatives than cashing in your policy. The capital gains tax rate is the lowest rate you’ll pay, but the impact on your financial plans could be substantial.
