How LIRPS Work. Essentially, when you pay premiums for a life insurance retirement plan, part of that payment is put into a savings account known as the cash value. This savings account can grow over time, tax-deferred, at a pre-determined interest rate
How LIRPS Work
Essentially, when you pay premiums for a life insurance retirement plan, part of that payment is put into a savings account known as the cash value. This savings account can grow over time, tax-deferred, at a pre-determined interest rate.6 There are a few different ways this cash value can allow you to use life insurance for retirement benefits:
Overfund Cash Value: If you choose to contribute a higher amount to your LIRP’s cash value, it can grow at a faster pace and give you a stronger foundation to work with later.
Borrow Against Cash Value: You can take out a loan against the value reflected in your cash value savings account of your life insurance retirement plan. This may be especially helpful if you’re trying to make a large purchase later in life.
Withdraw Cash Value: In some emergency cases, you may be able to withdraw directly from the cash value savings account. However, this is not always possible, so we recommend taking a closer look at the life insurance retirement plans you are considering.
Who Should Get a Life Insurance Retirement Plan (LIRP)?
There are a handful of situations where a life insurance retirement plan can be especially beneficial. If you are already contributing the maximum amount to your 401(k) or IRA, you may be ready to start using a permanent life insurance plan for a retirement strategy.7
Additionally, if you have anyone in your family who depends on you financially, a LIRP can help you prepare for retirement and protect your loved ones if a tragedy were to strike.
Lastly, if you have significant financial goals for your retirement, a LIRP can help you save additional money outside the IRS contribution caps.
Ctedit by Shawn Plummer, CEO, The Annuity Expert
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