What is a Life Insurance Retirement Plan in 2023

According to the National Association of Insurance Commissioners, life insurance policies are one of people’s most important financial assets. With a proper life insurance retirement plan, you can be sure that you will be taken care of after you’re gone.

Life Insurance Retirement Plans (LIRPs) are designed to help individuals save for retirement by having an additional source of income and investment returns over and above Social Security and savings accounts.

Your beneficiaries will receive the death benefit tax-free income if you pass away prematurely, net of the loan you have already taken as retirement income.

You’re not alone in wondering what life insurance retirement plans will look like in 2023. But the answer might surprise you. This article will help you understand where life insurance retirement plans are headed and what it will take to get there. So, whether you’re a life insurance retirement plan fan or just curious about the future of life insurance retirement plans, keep reading.

What is a Life Insurance Retirement Plan

A life insurance retirement plan is a financial product that helps you save for retirement while providing a guaranteed income for your loved ones. An insurance company provides the benefits, and your investments will grow.

The amount of money you choose to invest will determine how much of your income will go towards paying the premiums and how much will go towards growing your nest egg. Then, when you die, your beneficiaries will receive the rest of your money.

How Does a Life Insurance Retirement Plan (LIRP) Work?

Using LIRPs can help you grow your retirement accounts and fill in the gaps if the stock market falls. For example, suppose you max out your traditional investment account contributions. In that case, any extra money can increase your cash value, providing tax-deferred investment growth.

Increasing the value of cash

Cash-value life insurance policyholders often overfund their policies to build up enough money value to backfill retirement. The additional funds are deposited into the policy’s cash value and grow tax-deferred.

You can take out a loan against the value reflected in your cash value savings account of your life insurance retirement plan.

It works, however, only if you aren’t required to withdraw before you are 59 1/2: An overfunded cash value plan that exceeds the yearly deductible (set by the IRS) converts into a modified endowment contract (MEC) and is subject to additional taxes and penalties for withdrawals.

In retirement, spending the cash value is essential.

You should withdraw at most 4% of your savings during retirement each year. You can access your life insurance policy money and any other retirement accounts when you have a cash-value life insurance policy.

Expenses associated with long-term care

Suppose you have aging-related medical expenses or must pay for a nursing home. In that case, you can add a long-term care rider to your life insurance policy, which provides an accelerated death benefit.

Advantages and Disadvantages of a LIRP


  • Distributions are tax-free
  • There is no tax on the death benefit
  • Guaranteed interest rate (whole-life policies only)
  • Growth potential (universal, indexed, and variable policies
  • Accelerated benefit riders
  • Guaranteed death benefit
  • Provisions for special needs children, estate taxes
  • Access to cash value (Loans)
  • No contribution limits


  • Non-deductible contributions
  • Higher cost
  • Expensive premiums
  • The interest rate may be low
  • Limited investment choices, possible loss of principal (variable universal policies only)
  • Accrue interest on loans
  • It may never be needed
  • Additional cost.

What are the benefits of life insurance for funding an early retirement?

When you buy life insurance, you can fund an early retirement. You should consider this benefit, especially if you plan on retiring early. You can use your money to pay for a house, pay for college tuition, or save for retirement. 

If you plan to retire early, you must know you will need a lot of money. This is why life insurance is so important. You can get the money you need for a home, college tuition, or retirement without spending any of your money. You can even save for retirement by buying life insurance.

Life Insurance Death benefit A permanent life insurance policy is utilized in the design of a LIRP and if death occurs, the insured’s beneficiary will receive a tax-free death benefit.

How Much Does It Cost To Invest In A LIRP?

The cost to invest in a LIRP will depend on your age and the amount of money you want to invest. The younger you are and the larger the money you want to invest, the higher the cost. The average cost of investing in a LIRP is between $5 and $10 monthly. This is an excellent way to save money for retirement. Your permanent life insurance premiums are invested in your LIRP, and you may choose to increase the amount.

Is Permanent Life Insurance A Good Investment For Retirement? 

Indeed, only some people are interested in having a LIRP. Still, these people must realize there is no “one-size-fits-all” approach to retirement saving. For most individuals, the high cost of permanent insurance and the lower rates of return outweigh the benefits of having an extra retirement account.

LIRPs are good options if you want to contribute all you can to your retirement account. Still, they are limited in how much money they can put into a typical post-tax investment account.

A LIRP is a retirement strategy that uses the cash value of permanent life insurance policies, such as whole life and universal life insurance, to hold retirement assets.

Final Thought

This article will focus on different Life Insurance Retirement Plans for people looking to start retirement planning. A plan has many components to it, however. I will cover the main ones that are needed for you to know about when considering the plan and what you should do to make it happen.

Frequently Asked Questions 

Can you use life insurance as a retirement plan?

Life insurance is a form of retirement planning. It can be used in the same way as an IRA. First, however, many must learn that life insurance is a great way to supplement your retirement savings. 

Life insurance agents often promote permanent life insurance that accumulates cash value as a way to save for the future.

You can invest in life insurance before you retire. Buying life insurance and investing the cash value is brilliant if you can afford it. However, the longer you wait, the higher your premiums will be. So make sure you are ready to pay for them before you buy.

What is the difference between life insurance and retirement plans?

A life insurance policy helps cover the costs of your funeral. If you die before retirement, your beneficiaries receive a benefit. With a retirement plan, you set aside money for your retirement. If you retire before you die, your beneficiary receives a benefit. There are many different types of retirement plans. There are government-sponsored programs and private company programs.

Is it better to have a 401K or life insurance?

A life insurance policy will protect your family if something happens to you. Also, it is essential to understand that having a 401K means only some events cover you. A life insurance policy is an excellent way to ensure your family will always be cared for.

Is permanent life insurance an excellent way to invest for retirement?

Yes, permanent life insurance is a perfect way to invest in retirement. However, you are looking for a safe investment guaranteed to provide income for life. In that case, permanent life insurance is one of your best investments.

Permanent life insurance is an excellent investment because it provides a steady income stream for your family without risking your capital. In addition, it is a simple, low-cost investment that is easy to understand and requires no special knowledge to purchase. 

A life insurance retirement plan (LIRP) is a continuing lifetime policy ( permanent life insurance ) that utilizes the cash value component to assist retirement income.

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