Partially, but mostly just because that money, like all loans, is tax-free but not interest free and sometimes the interest rate isn't very good at all. Whereas a life insurance policy is pretty good for your legacy, so I'd leave it to fund the legacy unless you really need it.afan wrote:Is that to minimize the risk of the policy lapsing?White Coat Investor wrote:
My understanding is that you're usually better off taking policy loans last rather than first.
That would be my worry with the OP's plan. Take out loans in the 60's and hope that the policy does not lapse over the subsequent decades. This runs the risk of being 95, having spent down a large share of retirement funds and needing to come up with a huge sum to keep the policy going or pay the taxes. By taking loans late, one avoids this risk.
Of course, depending on mortality charges and investment returns, there is a risk that the cash value to support sizable loans might not be there in the later years.
Wade Pfau feels differently though. He thinks borrowing against your house or life insurance throughout retirement can make things "more efficient." I think his main point is that if you're going to spend both the life insurance money and your portfolio, you should withdraw from the portfolio when times are good and the life insurance when the market is down to increase efficiency.