Life Insurance Retirement Plan (LIRP) 101
The Californer/10292362

LOS ANGELES - Californer -- A Life Insurance Retirement Plan (LIRP) is a financial strategy using the cash savings from a permanent life insurance policy during the retirement years.

Unlike term life insurance, permanent life insurance policies have a cash savings account, which eventually pays the policy's premiums itself and creates tax-free cash that you can use for whatever you want. The death benefit of an insurance policy is separate and provides a payout to beneficiaries.

It's important to remember that when taking out cash, you must pay it back if the cash value ceases to cover premiums or if it subtracts from a death benefit that you want to leave to a loved one. Also, a life insurance retirement plan is not designed to replace a 401K or an IRA but can enhance your current savings plans for retirement. Here's more.

The Benefits of a Life Insurance Retirement Plan (LIRP):

• Tax-Free Growth: The cash value of your permanent life insurance policy will continue to grow, without being taxed, much like a 401(k) and IRA. Permanent life insurance premiums are expensive, so it's recommended that you allow the cash value to grow and pay its own premiums, which increase over the years.
• Tax-Free Withdrawals: If you're over the age of 59.5, withdrawals from the cash value are tax-free, as long as they follow IRS guidelines and don't exceed the policyholder's contributions. This rule is called the "basis."
• Tax-Free Death Benefit: In addition to the cash value of the policy, a permanent life insurance policy includes a separate death benefit that is paid tax-free to the named beneficiaries on the policy.
  
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  If you withdraw more than what needs to be in the account to cover premiums, the amount will be deducted from the death benefit. You also have the option of making the premium payments on your own, but they do become more expensive as you age.
• Foregoing the Death Benefit: If you don't plan on leaving behind money
• for your loved ones or as a legacy to a business, you'll have more tax-free cash to use for whatever you want.
• No Contribution Limits: Unlike 401Ks and IRAs, there are no annual contribution limits. LIRPs are a secure way to save money on taxes, but it's recommended that you do so only after you max out the contributions to your 401K and IRA.
  
  If you're patient and wait until you're 59.5 or older, you won't pay taxes on loans and withdrawals from the cash balance, so long as your cash value does not exceed limits.

How Does a Life Insurance Retirement Plan Differ From Regular Life Insurance?

For the full article visit https://smartfinancial.com/life-insurance-retirement-plan