A life insurance retirement plan or LIRP is a powerful wealth accumulation tool used by individuals looking to build their own private pension plan and reduce their income tax liability during retirement.

With the unreliability of social security and the uncertainty of employer-sponsored retirement plans, a Life Insurance Retirement Plan makes for a great tax-deferred solution for accumulating wealth and a tax-free method to take your wealth as income.


A LIRP is a tried and true method used by many high-income earners to build a solid tax-free retirement income that can supplement other traditional plans consumers often implement.

The LIRP isn’t for everybody but with our help and guidance, you can decide if it’s a good idea or undertaking. In almost every situation we will recommend that you use participating whole life insurance to fund your LIRP. But first, let’s take a look at the pros and cons.


The Positive Aspects of a LIRP


Since most individuals and families have a conservative attitude when it comes to retirement planning, we will always recommend whole life insurance because the cash account will earn tax-deferred interest and annual dividends.

This method of accumulating funds based on the insurance company’s investment performance combined with annual dividends will allow you to accumulate significant wealth over time that you can access at any time via policy loans and withdrawals.

When you use policy loans to access your cash account, the funds are not withdrawn from your account since they are collateralized to guarantee your loan. Although collateralized, your cash value account will continue to earn interest and dividends.


A LIRP Provides Safety even in a Volatile Market


Whole Life insurance, purchased from a mutual insurance company is the better vehicle to accumulate wealth in your LIRP. Mutual insurance companies are owned by their policyholders rather than investors, and as such, the profits are divided among policyholders (usually annually) rather than stockholders.

Additionally, you as a policyholder will have several options for receiving your dividends:

  • Purchase Paid-up Additional Insurance (recommended)
  • Reduce one or more future premium payments
  • Receive dividends in cash
  • Leave with the insurer to accumulate interest (the interest earned is taxable)
  • Reduce the balance of an outstanding loan on your policy
  • Reduce the number of outstanding premium payments

Although dividends are never guaranteed. we can provide a list of companies we represent and the historical data for dividend payments.

Your LIRP does not pose a Tax Liability


Traditional retirement plans are either fully taxed or tax-deferred, however, with a participating whole life policy your contributions (premiums) are made with after-tax money, and the interest you earn is tax-deferred. Since you will be taking your money at the appropriate time via policy loans you will avoid paying taxes on your income stream during retirement.


The “live too long” Safety Net


For many retirees, aging isn’t always a good process. Many retirees become critically ill or must live out their golden years in a nursing or hospice facility. If this is the case for you, your LIRP has an accelerated death benefit provision that provides for the insurer to advance a large portion of your death benefit to help you and your family deal with severe illnesses that result in extreme medical costs and nursing expenses.


Negatives of a Life Insurance Retirement Plan

Fees and Management Expenses


The negative press we’ve encountered regarding a LIRP funded with Whole Life insurance is debatable. Although you’ll likely find many articles suggesting that the management fees and other expenses are higher with a LIRP if you look closely and compare the fees to the account value, the fees charged in a LIRP are about the same, or in some cases even lower than fees charged in traditional retirement plans.


Lower Returns than what the Stock Market Offers

 Since a LIRP is designed to accumulate wealth over time, most naysayers comment that you can earn money quicker using traditional investment products. However, please remember that will be building an asset over time that will not have the tax-liability that traditional retirement plans like a 401(k) or IRA will have when you begin using your asset as retirement income. Remember, how much of your investment you can keep will be critical when you are no longer working.


The Companies we recommend for your LIRP


Although all insurance companies that offer IUL policies change their CAP, FLOOR, and PARTICIPATION rates from time to time, many of the companies we represent offer bonus money for policyholders. In most cases, the bonuses are paid to loyal policyholders who are in it for the long term.


Frequently Asked Questions

Is life insurance a good retirement plan?

Yes, a life insurance policy can be used for retirement. Life insurance policies that come with a cash-value component allow for the cash-value account to grow over time, which can then be used as a source of income in retirement years. Additionally, policyholders will keep more of the retirement funds because when you withdraw money via policy loans, the money you withdraw will be tax-exempt.

What is a life insurance retirement plan?

A life insurance retirement plan (LIRP) is a method of using after-tax dollars to invest in cash-value life insurance. Since your LIRP will earn interest and dividends over time, you can accumulate significant wealth that has minimum tax liability and keep more of your investment for retirement.

What is the best type of life insurance for a LIRP?

The type of life insurance you’ll require for your LIRP must be permanent life insurance that builds cash value over time. A participating whole life insurance policy that earns interest and dividends from a mutual insurance company is an effective way to fund your life insurance retirement plan.

Why invest in a LIRP when I have a 401(k)?

We recommend that you consider a LIRP along with your 401(k) because your LIRP is not subject to government constraints that limit the amount you can contribute and have penalties if you withdraw YOUR money before age 59 1/2.

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Monteagle, TN 37356
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Curt Gibbs