A Life Insurance Retirement Plan (LIRP) is a type of financial strategy that combines life insurance with retirement planning. It typically involves purchasing a permanent life insurance policy—such as whole life or universal life—that builds cash value over time. The key features include:

How it works:

Premium Payments:** You pay premiums into the life insurance policy, which covers the cost of insurance and contributes to the cash value accumulation.

Cash Value Growth:** The policy’s cash value grows tax-deferred over time, often at a guaranteed minimum interest rate or based on investment performance, depending on the policy type.

Tax Advantages:** The cash value growth is generally tax-deferred, and policyholders can often access the cash value through tax-free loans or withdrawals (up to the basis).

Retirement Income:** In retirement, the policyholder can borrow against the cash value or withdraw funds to supplement income, providing a source of tax-advantaged retirement funds.

Death Benefit:** The policy also provides a death benefit to beneficiaries, offering financial protection.

Why consider a LIRP?

Tax Benefits:** Potential for tax-deferred growth and tax-free withdrawals/loans.

Flexibility:** Can serve as a supplemental retirement income source.

Financial Security:** Provides life insurance coverage and a savings component.

Estate Planning:** Can help in leaving a legacy or covering estate taxes.

Important considerations:

Costs:** Permanent life insurance policies can be expensive, with fees and charges that may reduce cash value growth.

Long-term commitment:** Building sufficient cash value takes time and consistent premium payments.

Not a pure investment:** While it offers cash value growth, it’s primarily insurance, not a dedicated investment vehicle.

Summary:

A Life Insurance Retirement Plan is a strategic use of permanent life insurance policies to build cash value that can be accessed during retirement, offering both insurance protection and a potential source of retirement income with favorable tax treatment.

Would you like more details on specific types of policies (like whole life or universal life) or how to determine if a LIRP is right for you?