When planning to safeguard your financial future, you will always come across different strategies worth leveraging. Among the most common terms you are certainly going to come across is a 7702 plan. For those who might not know, 7702 plans are marketed as one of the ways of saving for retirement.
Although they carry with them a savings component, 7702 plans are actually a form of life insurance. An important point to remember with the 7702 plan is that most insurance companies market them as retirement plans with the main intention of making sales.
While you can still use 7702 plans to save money, they might not be as efficient as other types of life insurance. Moreover, they come with high premiums and hefty fees thus mitigating any financial benefits you might achieve after saving your money.
If you have already made up your mind to get a 7702 plan, then it would be better to do it for the sheer purpose of enjoying life insurance benefits. By thinking of it as a life insurance policy that offers extensive coverage, you stand a high chance of saving some extra money. Despite the fact that you will be investing some of your money, the returns are not comparable to investment accounts that are explicitly set aside for retirement.
Remember, life insurance companies sell 7702 Plans, and you will have to pay premiums on a monthly basis. The premiums go towards your benefit and the policy’s cash value. Since you can invest the cash value, it is definitely going to grow over time.
However, you can only withdraw it once the policy has been in place for a number of years. If you die, then your beneficiaries will receive a death benefit together with any cash value that might be remaining.
The Bottom Line
Always take it upon yourself to factor in the pros and cons of a 7702 plan before using it. Only then will you not worry about using the wrong strategy in your quest to enjoy a financially secure future.
