Retirement
What Is a Life Insurance Retirement Plan (LIRP)?
LIRP means life insurance retirement plan and is not meant to replace a standard retirement plan, like an IRA or 401(k).
When someone is considering a life insurance retirement plan or LIRP, they are usually referencing a permanent life insurance plan. The two life insurance terms can be used interchangeably.
LIRPs are permanent policies because they have a cash value portion that accumulates savings over time. Permanent life insurance plans also have a standard death benefit paid to a beneficiary when the policyholder passes, and the plans never expire. This means that the life insurance retirement plan lasts the entire life of the policyholder.
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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. There are a few different ways this cash value can allow you to use life insurance for retirement benefits:
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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.
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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.
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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.
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