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Tax-free Income From Life Insurance: Life Insurance Retirement Plans

It is important to understand that a Life Insurance Retirement Plan (LIRP) can provide 2 to 3 times the after-tax income of traditional retirement planning assets. What this means is that 1. you don’t need as much money to generate the same amount of retirement income or 2. you can get 2 to 3 times the income from the same amount of savings.

Lower Risk

It should be apparent that if you can get 2 to 3 times the income from the same amount of savings, then you don’t need to take on as much risk to get the same income. This means that an asset with a lower rate of return and less market volatility can still provide more income.

Life insurance companies invest their assets in the Debt Markets. They buy Bonds, Treasuries, Mortgage-backed Securities, Preferred Stocks and make other debt investments. Life Insurance companies are conservative by nature. They don’t need to hit the ball out of the park. They just need slow steady growth

It’s important to know that an Indexed Universal Life policy uses the earnings from the insurance company’s investments to hedge in the index options markets. The goal of this hedging is to capture a premium over the return in the debt markets. You should realize that there is nothing quite like an Indexed Universal Life on a risk-adjusted basis. What I mean is there is no market risk to principal and the returns are better than debt-market rates of return. And unlike your financial advisor, the insurance company has an incentive for the cash value to grow as quickly as possible.

Higher Income

You need to realize that account statements don’t pay bills. That statement is just a piece of paper with numbers printed on it. You need CASH to pay bills. Your statements only show the value of your portfolio. You need to convert that savings into income that will last through retirement.

Most financial advisors use the “4%-Rule” to determine the safe withdrawal rate from your retirement savings. Don’t take my word for it! Google it.

The Rule of Thumb for Life Insurance is 8%.

It’s important to point out that most people will get more bang-for-the-buck with a LIRP than with Traditional Retirement assets. This means that despite higher growth rates for most of their saving years, even a person in their twenties today would be better off with a LIRP than traditional assets. The LIRP would generate more income.

Additional Resources

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Free eBook – How Does Life Insurance Work?

How can the cash value earn more than the borrowing rate?

Click Here for a great article explaining why Life Insurance Policy Loans are so powerful.

Minimum and Maximum Over-funded Life Insurance Policies

Here’s a table comparing a Traditional IRA to a LIRP. Both are starting retirement with the same amount of savings.

Watch this video for an explanation of the table…



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No Rendering of Advice: The financial content in this document is provided for your personal education. It is not intended for trading purposes, and cannot substitute for professional financial advice. Always seek the advice of a competent financial advisor with any questions you may have regarding a financial matter. Information in this document is not appropriate for the purposes of making a decision to carry out a transaction or trade nor does it provide any form of advice (investment, tax, or legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments, or products.

The sole purpose of life insurance is for the death benefit protection. Any other benefit is ancillary.