The accumulation phase is then followed by the distribution phase, in which retirees start obtaining and using their funds.
What makes this phase so unique is that the IRS allows you to take your distributions income tax-free when it is drawn from the cash value of your policy. Income from a LIRP can be withdrawn as three methods: a withdrawal, loan, or participating loan. If you have ever heard of the “be your own banker” strategy, then you may be familiar with the phrase participating loan.
As a bonus, the funds in the cash account continue to earn interest, as if they had never been accessed. Wealthy individuals and families have been using this strategy for decades to grow, protect, and access their money in a tax-advantaged way, and to give them more control. But you don’t have to be rich to take advantage of the benefits that a LIRP can offer.