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3 Insurance Policies That Could Help Pay For Retirement

A 5 to 6 percent annual return is typical in a good market. Some products increase payouts if your investments increase. You can withdraw your account balance at any time, but many annuities impose a surrender charge if you cash out within the first six to seven years of the annuity. There's also typically a death benefit feature to help your heirs pay future estate taxes.

The SEC has tips for researching variable annuities.

"What sells variable annuities today are the extra bells and whistles such as a guaranteed growth rate on future income and guaranteed withdrawal rates. This helps take away the downside but does not limit the upside in a bull market," says Weiner.

The best time to buy a variable annuity is when the market is high and you want protection against a fall. When you purchase a variable annuity in a strong bull market they do well. If however, they're purchased in a bear market, or they're owned during a severe bear market, your investment performance will likely stagnate. Insurers aren't able to manage these as effectively as they manage mutual funds in a down market.

Annuities are hardly right for everyone. They limit liquidity, have surrender charges if you want to abandon them, and can carry expensive fees. "But they may be right for people who don't have enough Social Security or pension income or those who cannot sleep at night because of worries about the stock market," says Weiner.

Permanent life insurance

Permanent life insurance accrues a cash value over the life of the policy. Unlike term life insurance, which doesn't accrue cash value and simply pays a death benefit, the cash component in permanent life builds up over time, and the policy owner can take a loan against the cash value.

If you hold your permanent life insurance policy for decades, giving the cash value time to build, you could have a very nice nest egg at retirement. Even if you never use the cash value, you have the life insurance if you pass away.

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