Why is a LIRP so powerful?
A LIRP is so compelling because of how the IRS treats the taxation of this plan. A LIRP offers beneficial tax treatment during both the accumulation phase and distribution phases like most retirement plans; however, what makes the LIRP so unique is favorable tax treatment upon death. It’s the only plan that can maximize the assets you pass on to the next generation (yeah, that legacy money).
The funds in a LIRP track market indexes like the S&P 500, Dow Jones Industrial Average, and more in its cash value account – and the money grows tax-deferred, just like in an IRA or 401(k).
Traditional IRAs and 401(k) allow you to build up funds tax-deferred, but Uncle Sam gets a portion of your withdrawals (i.e., tax) in the future. But a LIRP gives you the option to grow the cash account tax-deferred AND access the money tax-free.
While you are allowed to benefit from growth of the underlying indexes in a LIRP, you don’t incur losses when the index has a down year. So, your gains can continue on top of previous growth, without having to “make up” for any previous loss.
Even if the underlying index(es) performs poorly in a given time period, a LIRP will simply credit the cash account with a 0% for that period. This can be nice in times like the 2008 Recession and the 2020 COVID-19 crisis (and corresponding stock market dip).
Unlike IRAs and employer-sponsored retirement plans, LIRPs do not impose an annual contribution limit. So, even if you have “maxed out” these other accounts, you can still continue adding to a LIRP, and in turn, keep accumulating funds on a tax-advantaged basis.
LIRPs are often referred to as “self-completing” because if the unexpected occurs, your loved ones will still have access to the death benefit funds on an income-tax free basis.
How does a Life Insurance Retirement Plan stack up
Whether you’re in the accumulation, retirement or estate maximization phase of life, the right mix of financial tools can help minimize your taxes and maximize your assets.
|401 K||ROTH IRA||LIRP|
|Tax Free Accumulation|
|Tax Free Distributions|
|No Market Risk|
|No Annual Contribution Limits|
|Income Tax-Free Death Benefits|
|No Income Contribution Limit|
Keep more of what you earned. You deserve it.
Download our free guide to a tax free retirement.