Glenn Daily, age 65, may have found the golden goose.
He's sitting on a pot of cash that not only accrues interest; it can also be tapped tax-free.
The New York-based fee-only insurance consultant has held onto an insurance policy that his parents first purchased for him when he was just 12 years old. Each year, he pays $253 to keep it in force.
It's known as a whole life contract — it requires him to pay fixed premiums and offers a tax-deferred interest-bearing account, known as cash value.
For now, the cash value of the policy is about $32,000 and grows at a rate of about 4 percent.
"If you think of this as a fixed income investment, where can I get that?" asked Daily. "Banks are proud to advertise 2 percent on a CD, and here I am getting more than 4 percent."
He has also tapped that cash in the form of a $27,000 loan, which he has taken free of taxes at an interest rate of 3.7 percent. Daily pays the interest every year and intends on repaying the debt.
Done properly, a tax-free loan on life insurance can offer investors a source of liquidity and tax-free income in retirement.
Done incorrectly, that lifeline can trigger a tax landmine and destroy the insurance policy altogether.
Here's what you should know about taking a tax-free loan from cash value policies.