Life Insurance Retirement Plans
A life insurance retirement plan uses a cash value life insurance policy to grow assets for future income while keeping lifelong protection in place.
When funded and managed carefully, a LIRP can complement 401(k)s, IRAs, and taxable accounts by adding tax-advantaged accumulation and flexible access to cash value.
What Is a Life Insurance Retirement Plan?
A LIRP is not a separate account. It is a permanent life insurance policy, typically indexed universal life, universal life, or whole life, funded with the goal of building meaningful cash value.
Growth is tax deferred. Later, many owners access that value through withdrawals to basis and policy loans, which reduce policy values and benefits if not repaid.
How A Life Insurance Retirement Plan Works
You pay premiums above the minimum required to build cash value within IRS limits. The insurer credits interest according to the policy type.
Over time, the cash value may support withdrawals or loans that help supplement retirement income. To keep the policy in force, funding must cover charges and the cost of insurance, especially in low-crediting years.
Ideal Candidate For A LIRP
- You already contribute to workplace plans and IRAs and want additional tax-advantaged accumulation.
- You value permanent death benefit for family or business, paired with access to cash value later.
- You want another source for retirement income that is not directly tied to market swings or required distributions.
- You prefer funding that can adapt to changing income, within policy limits.
What To Consider Before Acquiring A Life Insurance Retirement Plan
A LIRP works best with careful funding and regular check-ins. Keep these considerations in mind to avoid surprises and keep coverage and cash value on track.
Ongoing Costs
Policy charges and the cost of insurance apply and can rise with age.
Funding Discipline
Underfunding can erode values and threaten coverage.
Loan Management
Loans accrue interest; unmanaged balances can trigger lapse and taxes.
MEC Rules
Overfunding above IRS limits can convert the policy to MEC status, changing taxation of withdrawals and loans.
Carrier Difference
Credit rates, index strategies, and guarantees vary by insurer.
Taxes
Rules are complex and can change; involve your tax professional.
LIRP vs. 401(k) & IRA
A LIRP is designed to complement, not replace, your 401(k) or IRA. The sections below compare how each handles contributions, access, taxes, required distributions, and purpose so you can see where a LIRP may add flexibility and protection alongside your qualified accounts.
Contributions
401(k)s and IRAs have annual caps; a LIRP does not, though funding is constrained by product design and underwriting.
Access
Retirement plans often limit access before certain ages. A LIRP may allow earlier access through withdrawals or loans, subject to policy rules.
Taxation
Qualified plans may provide deductions upfront or tax-free Roth growth. LIRPs offer tax-deferred growth and potential tax-advantaged access but no deduction for premiums.
Required Distributions
Traditional IRAs and many plans require RMDs; LIRPs do not.
Purpose
Plans are built primarily for retirement accumulation. A LIRP also provides lifelong death benefit and estate planning flexibility.
Who Should Consider A Life Insurance Retirement Plan?
High earners who have maximized qualified plans, small-business owners who need permanent coverage and flexible accumulation, and families who want a blend of protection and access to policy value may all benefit from evaluating this strategy.
Explore Whether a LIRP Fits Your Plan
We compare carriers, products, and funding strategies, explain MEC and loan rules, and design a plan that coordinates with your 401(k), IRA, and taxes. You leave with clear next steps and an annual check-in to keep everything on course.