As a follow-up to my previous, very broad post about financial management in the Foreign Service, I thought it might help to share something M and I only learned about relatively recently: life insurance as an investment. Like many other government employees, Foreign Service members have access to robust retirement options. For example, I have the combination of Social Security (though I had plenty of public school teachers tell my generation not to count on this one), a pension, and an IRA through the Thrift Savings Plan (TSP, the U.S. government employee retirement plan).
But what if you have more disposable income and would like to invest that in more diverse sources to build wealth for the future? There are so many options out there. A popular avenue with Foreign Service Officers is real estate, which I'll address in a future post. But another strategy involves life insurance. I first learned about this method attending financial education webinars for Foreign Service members, and after that M and I did a deep dive into how this mysterious new world works.
We ultimately decided to purchase permanent life insurance. Unlike FEGLI (Federal Employees' Group Life Insurance), my new life insurance plan is tied to me as an individual and not to my job. In other words, if something unexpected happens and I need to leave government service, I'll still be covered. This advantage alone probably would've been enough to convince us to make the switch, but there were other reasons, too.
At the risk of sounding morbid, I have to say that not too long ago, I thought life insurance only mattered if you die. Turns out, there are plenty of plans that go far beyond this. One thing I like about the plan I ultimately selected, for instance, is that it will pay out a stipend even prior to my passing if I'm diagnosed with a serious illness or suffer a major accident. That security and peace of mind is well worth our investment. Moreover, because I chose a permanent life insurance plan instead of a term life insurance plan, I can collect that savings tax-free with compound interest as a boost to my income in retirement. (Term insurance is cheaper than permanent insurance but is designed to provide coverage only within a specified timeframe. Make sure you hear both sides of the debate, though; some prefer term life insurance plans or say to skip life insurance entirely.) Because I'm starting the process at a young age and in good health, life insurance is much more affordable.
If you want to learn more about life insurance as a retirement investment, I highly recommend you check out The Purpose of Money, a podcast and online resource for personal finance and investment run by our friend and colleague Acquania. You can even contact her through her website and she will do customized financial advising for you and offer helpful advice on your retirement savings plan, no matter where in your investment journey you are. (I should add that we're not getting any kind of referral bonus or kickback for sharing information about her financial advising services; we really just think they're that good!) We especially hope this post was helpful to other investment newbies looking to diversify their savings and build some financial security for the future. If you have investment tips, please feel free to comment them below.
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