With variable life insurance, a form of permanent (cash value) life insurance, you split your premium payments among sub-accounts that look like mutual funds. You get tax-free accumulation even if you transfer money from one sub-account to another. Typically, you will be paying life insurance premiums periodically, which is a form of cost averaging.
If you enjoy strong sub-account performance, you can maintain the same premium payments and see your cash value and policy death benefits increase.
Alternatively, you can reduce premium payments in the future while still maintaining your insurance coverage. Thus, variable life insurance allows you to profit from the long-term growth of the stock market. In addition, you will benefit from all the tax advantages of permanent life insurance:
There is no investment income tax inside the policy. You can access a portion of your cash value without having to pay income tax. When you want the money to be in the cash value of your policy, you can make tax-free withdrawals until you reach the amount you paid in premiums. After this point, you can take out tax-free policy loans.
After your death, a substantial payment will be paid to your beneficiary, free of income tax.
The bottom line is that variable life insurance can provide you with tax-free retirement income, provided you back up the policy carefully, and tax-free death benefit for loved ones.