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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.

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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.

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:

  • 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.

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