Want a LIRP or Life Insurance Retirement Plan?

LIRP is an acronym that means Life Insurance Retirement Plan; it’s a specially designed cash-value life insurance policy that provides much more than a death benefit.

A LIRP is a permanent life insurance plan that simulates many of the tax-free traits of the Roth IRA. A properly funded LIRP can provide large, tax-free income stream during the policyholder’s retirement years.

There is no income limit to a LIRP — unlike a Roth IRA, no earned income limits exist. This means high-income individuals can also participate in a life insurance retirement strategy.

In this article, we will take a broader look into how this plan works and see an example of how much tax-free income is possible.

What is a LIRP?

LIRP Definition: A life insurance retirement plan, commonly referred to as a LIRP, it’s a type of permanent life insurance policy that builds cash value – some call it an overfunded life insurance policy or 7702 plan, TFRA and others compare it to infinite banking plans.

Unlike most other permanent life insurance policies, though, that are purchased for their death benefit protection, a LIRP is used more for its cash value and retirement income potential. The cash value can be accessed tax-free for the purpose of supplementing your retirement income.

There are two types of permanent life insurance policies that are used for creating a LIRP. These are:

While whole life policies can provide a viable framework for a LIRP, universal life insurance can typically provide the best LIRP platform. Specifically an index universal life insurance policy. One reason for this is that universal life policies are more flexible than whole life insurance. However, if you need immediate cash value then whole life insurance with a specific HECV rider will be best. Ask us about the differences.

How does a LIRP Work?

Depending on the type of life insurance policy you choose for a LIRP, you could rack up many benefits and tax-related advantages. These can include generating a market-linked return on the policy’s cash value, but without any downside market risk.

For instance, with an indexed universal life (or IUL) insurance policy, the return on the cash value is based in large part on the performance of an underlying market index, such as the S&P 500 or the Dow Jones Industrial Average (DJIA).

In policy contract years when the index performs well, a positive return is credited to the cash value, typically up to a set maximum, or “cap.” But in return for this somewhat limited growth, in contract years, when the index performs poorly, the cash value will not lose money. Rather, it is credited with a guaranteed minimum, or “floor,” which is frequently in the range of 0% to 1%.

So, not only is your principal protected from market downside risk with an IUL policy, but you can also continue to build upon previous gains without first having to make up for any prior losses in the account.

Now, that’s a win-win situation!  

LIRP Pros and Cons

Although LIRPs can offer a source of tax-free retirement income, there are some potential drawbacks to consider as well, depending on your goals for the policy.

The downside of a Life Insurance Retirement Plan

One downside of life insurance retirement plans is that because it’s a life insurance contract, you have to qualify for this type of retirement strategy medically. Because this is life insurance coverage, there is underwriting from the insurance company. If you have any major health issues or terminal illnesses, a LIRP strategy will not work for you.

Tax free build-up of the cash valueHigher premium than term life insurance
Tax free retirement incomePossible slower growth compared to equities
No annual funding limitsMay require ongoing contributions
Death benefit for survivorsHave a surrender charge in early years
Penalty-free access for long-term care needsContributions are not tax deductible

Is a LIRP right for you?

Find out here.

Start Now

The Power of “Tax Preferral”

Cash value life insurance can be a powerful addition to your overall financial planning. But not just for its death benefit – which, by the way, passes to beneficiaries income tax free. Life insurance policies can provide additional advantages, such as:

  • Tax-deferred growth
  • Tax-free income
  • Other qualifying non-taxable distributions

This is what’s known as the power of “tax preferral.”

In today’s market, you have many options available for saving for retirement. Some of these may provide tax advantages on contributions, growth, and distributions.

But if you’ve already “maxed out” your IRA and other retirement plan contributions, you may be seeking additional tax-advantaged vehicles. That’s where life insurance comes in. By adding permanent life insurance, you can diversify your portfolio from tax consequences. Life insurance can also provide you with flexibility and preferential tax treatment both now and in the future.

Most people don’t think of funding retirement with a life insurance policy. But it can have its place.

Taxation of Assets Now and Later

Best LIRP Insurance Companies of 2023

Many insurers offer LIRPs. However, there are a few companies that stand out above the rest when it comes to the best LIRP insurance companies. These include:

Allianz – No other company can compete!

Allianz is the best IUL insurance company, and it’s not even close. Here’s why they are the King of IULs.

  • Index Rate Lock
  • 40% interest bonus option with only a 1% asset charge
  • 15% interest bonus option with no asset charge
  • Highest Participation Rates
  • Multiple Uncapped Index Options

Rate lock is the most potent cash-value life insurance feature ever created, and no one offers it in the life insurance industry but Allianz. They also provide some of the best contractually guaranteed loan rates during the withdrawal phase of a LIRP.

No carrier has maintained its caps, participation rates, and bonuses like Allianz.

See Full Review


This carrier specializes in the child LIRP and will issue policies at a preferred rate for a child. Even with this, they are still not better than Allianz.

See Full Review
See Full Review


AIG offers an Income for Life Rider that is a beautiful benefit and can guarantee tax-free income for life.

See Full Review

North American

North American released their Builder Plus IUL 3 in May of 2021. This product is designed for death benefit protection and its long-term solid cash value accumulation potential.

This life insurance retirement plan offers long-term solid cash value accumulation potential through multiple interest bonus opportunities.

They also provide Accelerated Death Benefit Endorsements for critical, chronic, and terminal illnesses. Not many carriers offer the critical illness riser on their LIRPs.

See Full Review

Lincoln Financial

Lincoln’s IUL WealthAccumulate product is among the best LIRPs available due to its interest rate bonus feature and multiplier crediting method. Lincoln probably has the best LIRP on the market, along with Allianz.

See Full Review

Example of Tax-Free Income from a LIRP

Jim, who’s 40, is looking to save additional money for retirement. He purchases an Indexed Universal Life policy and pays $24,000 for 15 years, while he’s still working. The cash value grows tax-deferred for 26 years. If Jim retires at age 67 and chooses to start taking income a year later, he can potentially withdraw $135,114 a year for 23 years on a tax-free basis from the policy’s cash value. And he still has a death benefit in place to protect his family, should he die prematurely.

AgeYearLife insurance premiumLife insurance cash surrenderLife insurance tax-preferred incomeIncome tax-free death benefit
Total premiums paidTotal tax-preferred income

In this example, Jim contributed $24,000 per year in premium for fifteen years, for a total amount of paid-in premium of $360,000.

But starting at his age 67, Jim was able to access more than $135,000 per year – for the next 23 years – for a total tax-preferred income of nearly $1.9 million. At the same time, Jim’s loved ones were covered by a death benefit that, even after all of the income he accessed, was more than $770,000 when Jim turned age 90.

The LIRP provided Jim and his family with a long-term, tax-free income stream. And, because life insurance policies are considered to be “self-completing” plans, his survivors continued to have a death benefit “safety net”…just in case. See more life insurance retirement plan examples here.

Total Premiums Paid
Total Tax free Distributions

Are You a Good Candidate for a LIRP?

While LIRPs can offer a long list of benefits, not everyone is a good candidate for one of these plans. But, a LIRP could be a good option for you if:

  • You are looking for a way to supplement future retirement income
  • You have already maxed out your IRA and / or other retirement plan(s)
  • You want to make sure that loved ones are covered, even in the event of the unexpected

Is LIRP better than 401k?

One question we get asked a lot is “should I put my money in a 401K or a LIRP?” One recommendation we have is if your company matches your 401k contributions then never pass that up. But if were our money we would never choose a 401k over a LIRP. Here’s why.

  • You can lose money in a 401k. Ask anyone who wanted to retire in 2022.
  • Your 401k income is taxed when you start withdrawing money.
  • You can’t get your money out of your 401k without penalty before age 59 1/2.
  • You have max contribution limits to a 401k.

In a LIRP you get these benefits:

  • Won’t ever lose money.
  • Access your retirement savings with tax free distributions.
  • Access money in early retirement before age 59 1/2 without penalty.
  • You don’t have contribution limits which can especially help high income earners,

If you’d like to have a conversation and need help deciding between the two our financial advisors can help with a comparison illustration.

How to Set Up a Policy

A LIRP investment can be a complicated product without an expert to explain the fundamentals. You have to make sure you have a life insurance agent who knows how to design a properly structured policy to maximize cash value growth. Working with a retirement planning specialist like us is recommended before you move forward with the purchase of a policy.

An independent life insurance professional can go out into the marketplace and find the plan that works best for you and your specific goals.

At Insurance Geek, we are affiliated with more than 30 of the top-rated life insurers. So, we will match you with a plan and a premium that fits your budget. Contact us to get started with building your tax-free retirement income stream with a LIRP.

Is a LIRP right for me?

Find out here.

Get Quotes Here

Life Insurance Retirement Plan for Kids

Kids can own their own LIRP too. Because life insurance premiums are based in large part on age and health, children can be ideal candidates for LIRPs due to the low cost of insurance and, with so many years to let the policy’s cash value compound interest, a LIRP can set them up for a lifetime of financial security at an early age.