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LIRP: Secure Retirement with a Life Insurance Retirement Plan

LIRP: Life Insurance Retirement Plan
Insurance Quotes 2 Day Team

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University, a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA and Top of the Table member of the Million Dollar Round Table (MDRT). Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

 11 minute read

What is a Life Insurance Retirement Plan (LIRP)

LIRP, or Life Insurance Retirement Plan, is a powerful financial tool that can provide tax-free income during retirement. This guide will help you understand how to structure your policy for maximum growth and what companies offer the best plans.

The most used life insurance product for a LIRP is indexed universal life (IUL) insurance.  When structured properly, a LIRP can provide tax-free income during retirement, much like a Roth IRA without the contribution limits of a Roth IRA.

This article provides clear details on how to structure your policy, what companies we recommend, some real-life examples, and how we can help you start your own LIRP.

I want to emphasize that an LIRP must be structured properly to enjoy maximum cash accumulation growth and tax-free income at retirement.

You might ask. “Why would I contribute to a LIRP instead of my IRA or 401k?  After all, I get a tax deduction when contributing to my 401k.”  

I’ve heard this many times before. The fact is, you will not receive a tax deduction when you contribute to a LIRP, but you will be able to take tax-free income from your policy.  The income you take from your 401k or IRA is fully taxable, and if you take any money out before you are 59 1/2, you get hit with a 10% early withdrawal penalty on top of the taxes you will pay.

The Importance of Tax-Free Income with LIRPs

As Americans watch the national debt spiral further out of control, there’s a growing fear of higher taxation.  In fact, as of the first half of 2024, our nation has increased its debt to over $34 trillion.

Seeing the enormous government spending, many Americans are using tax-free strategies to protect their assets. Without them, the impact of rising taxes, inflation in the economy, and investment risk in the stock market jeopardize the hope for a comfortable retirement.

For many future retirees, a well-designed LIRP is becoming increasingly common as a retirement income strategy.   

How to Choose the Best LIRP Account for Your Needs

In the past, we have seen whole life insurance, variable universal life insurance, and indexed universal life insurance used as LIRP accounts.  

Our recommendation is to use an indexed universal life insurance policy from a company with quality products. When properly designed, we can minimize expenses and maximize cash value to create as much tax-free income as possible.  

We regularly review the top LIRP companies, and the following is our list of the top 5 IUL companies we feel are worthy of use for your LIRP account.

  • Allianz Life (Life Pro+ Advantage)
  • North American (Builder Plus IUL 3)
  • Lincoln (WealthAccumulate 2 IUL 2)
  • National Life (Summit Life)
  • Ameritas (FLX Living Benefits IUL)

You can read our reviews for each of these here on our website.

Steps to Design a Successful LIRP

A LIRP is not a one-size-fits-all solution to retirement income.

Our planning process gives us a picture of what you are currently doing for your retirement, including any holes in your plan.

It is our opinion that a LIRP is an addition to your current retirement planning and not a replacement. It is very important to understand the differences in taxation of a LIRP and your current IRA or 401k.  Our LIRP planning software does that for you.

Since a LIRP is an IUL policy, there are expenses to consider.

Our job is to design your policy with as little life insurance as possible to keep your policy expenses to a minimum and maximize your retirement income.

Our calculators determine how much life insurance you must purchase to satisfy the IRS and for your LIRP to be tax-free.  We build your plan around how much you want to save/contribute to your LIRP.  When we know how much you want to save, we can determine the minimum amount of life insurance to buy to keep your LIRP IRS-compliant and income tax-free.

Pros and Cons of LIRPs: What You Need to Know


  • Tax-Free Retirement Income: LIRPs allow you to receive money tax-free during retirement, providing a significant tax advantage compared to traditional retirement accounts where withdrawals are taxed.
  • No Contribution Limits: Unlike IRAs and 401(k)s, LIRPs have no annual contribution limits, making them ideal for high-income earners who want to save more for retirement than traditional retirement accounts allow.
  • Protection Against Market Downturns: Most LIRPs, especially when using indexed universal life insurance, offer protection against market losses. Your principal is protected from market loss and usually offers a guaranteed minimum interest rate or floor.
  • Flexible Access to Funds: You can access the cash value of your LIRP before retirement without the penalties typically associated with early withdrawals from traditional retirement accounts.
  • Death Benefit for Beneficiaries: Besides serving as a retirement tool, LIRPs provide a death benefit to your beneficiaries, which can serve as a financial safety net for your family.


  • Complexity and Need for Proper Structuring: LIRPs can be complex, and proper structuring is needed to maximize benefits. Missteps in policy design can lead to underperformance and tax issues.
  • Fees and Costs: There are fees associated with LIRPs, including premium costs, administrative fees, and agent commissions.
  • Long-Term Commitment Required: To reap the full benefits of a LIRP, a long-term commitment is necessary. Early withdrawals or policy termination will derail the tax-free income goal you are working towards.
  • Caps on Returns: Some LIRPs, especially indexed policies, may have caps on the returns you can earn, which might limit the growth potential compared to direct investments in the stock market.
  • Potential for Becoming a Modified Endowment Contract (MEC): If a LIRP is overfunded according to IRS rules, it can become classified as a MEC, leading to less favorable tax treatment on withdrawals.

Comparing LIRP and Roth IRA Contribution Limits

When it comes to a Roth IRA, there are strict contribution limits.

Currently, for example, high-income earners who are married and filing jointly can’t contribute any of their income to a Roth IRA if their combined taxable income exceeds $240,000.

If you are eligible to contribute to a Roth IRA, you are limited to a contribution amount of $7,000, or if you are age 50 or older, you can contribute $8,000.  The deadline to make your Roth IRA is April of the following year.

You may also be limited in what you want to contribute to a 401k or IRA.

The same limits apply to a traditional IRA as they do with a Roth.  The maximum IRA contribution for 2024 is $7,000, or if you are 50 or older by the end of the year it is $8,000.

LIRP alternative limits

LIRP alternatives


Understanding 401k Contribution Limits 

The 401(k) limits for 2024 are $23,000, and the SIMPLE deferral limit is $16,000 if you are under 50.  If you are over 50, these limits increase to $35,000 for the 401(k) and $19,500 for the SIMPLE.

Many of our LIRP clients max out IRA and 401(k) plans before contributing to their LIRP.  We recommend this for high-income earners receiving matching employer funds in the top tax brackets.

Unlimited Contribution Potential of LIRPs

The LIRP has no contribution limitations and can offer the flexibility needed to increase or decrease contributions.  You can even make up a contribution if you miss a year.  You can’t do this with a Roth IRA.

Depending on the amount you would like to contribute to your retirement savings, a LIRP might be the answer.

It just doesn’t make sense to defer taxes now if you will be in the same or higher tax bracket at retirement.

Government Regulations and LIRPs: What You Should Know

Large amounts of cash sitting in individuals’ life insurance policies have always been a target for the government.

The money in these accounts will continue to grow income tax-free, distribute tax-free income, and at death, pass income tax-free to your family.

However, as noted in history, the LIRP has been resistant to the impact of any such changes to tax law and remains an excellent way to use life insurance for retirement.

When Congress adjusted the rules on LIRP policies in the 1980s, those already in existence continued to be taxed under the pre-existing laws (grandfathered clauses).

Just recently, congress passed a monumental revision to IRC Section 7702.  The IRS now allows an even larger contribution to your LIRP than before.  The change will help lower costs in your plan and increase cash value growth.

How Interest is Credited in a LIRP: Key Insights

LIRP Interest Crediting
LIRP Interest Crediting

The LIRP offers the flexibility of allocating money inside your policy.

The S&P 500 is the most common index used in these policies. However, policyholders can choose among many indexing strategies.  You can also change from one indexing option to another and have access to a fixed account, earning a guaranteed amount of interest on your money.

Your risk tolerance will change throughout your lifetime, so choose a flexible policy.

Depending on the type of life insurance policy you choose, you will have the following options.  As mentioned earlier, you can use whole life, variable universal life, current assumption universal life, and indexed universal life insurance.

  • Stock Market (Variable Life) – Policyholders can deposit their contributions into mutual fund portfolios, known as sub-accounts, by the insurance company they’ve chosen. Even though this method may provide more substantial returns, it does put the policyholder at risk if the market severely declines.  Some consumers avoid this approach due to the economic collapse experienced in 2008 and the recent economic crisis 2022.
  • Index (indexed UL) – The accumulated cash value associated with this strategy is tied to the upward performance of a specified stock market index, such as the S&P 500.  Your LIRP participates in the growth of the index, which is currently around 9% to 11%. Conversely, if the stock market index performs negatively, the accumulation account is credited 0%.  This is a safe, manageable way to grow your tax-free money for retirement.
  • Insurance Company Investment Portfolio (whole life or current assumption UL) – Policyholders also have the opportunity to accumulate their cash value within the selected insurance company’s investment portfolio. Since insurance companies do largely manage risk, the return of these types of arrangements is usually safe, although modest. The average return of these types of policies ranges between 2 and 4%.

Comparing LIRP Returns with the S&P 500 Index

Average s&p return as of 2023

This makes even more financial sense because the policyholder can realize market-like returns in their policy without having to assume any risk in the market. This aligns nicely with Warren Buffet’s famous rule of investing – never lose money. 

With a LIRP, your bottom line is very clear: zero. Your floor rate makes your cash account immune to any losses in a volatile market; thus, prior earnings are protected. Considering that we’ve gone through 20 horrendous bear markets since the crash of 1929, the LIRP provides the peace of mind we all hope for. 

Who’s to say if another is just around the corner? If so, LIRP owners can ride it out without any losses.

Client Success Stories: Real-Life Examples of LIRP Benefits

You need to see the numbers an LIRP can provide before you decide. We use several IUL calculators to help build out LIRP models.

Harold is an ideal candidate for a LIRP using indexed universal life insurance. He is married, a successful attorney, and, at 35, he is retiring at 65. 

Harold is prepared to fund his LIRP with $2,000 monthly despite having other traditional investments. He plans to contribute $2,000 per month for 30 years and then begin to borrow against the cash value for a tax-free income stream. 

 This is what Harold can expect in terms of tax-free income using an assumption of around 6% interest from age 66 until age 100: 

Sample Tax-Free Retirement Plan for a 35 year old male

North AmericanAllianzNational Life
Contribution Amount$2000 per month$2000 per month$2000 per month
Starting Death Benefit$1,000,000$1,000,000$1,000,000
Death Benefit at age 65$3,240,000$2,915,000$2,785,000
Cash Accumulation value at age 65$2,240,000$1,915,000$1,785,000
Annual Tax-Free Income at age 65$259,000$166,860$158,000
IRR at age 658.25%8.14%7.31%
Illustrated Rate based on historical returns6.24%6%5.73%
The table above assumes that $2,000 per month is contributed to age 65 then taking monthly income from age 66 to age 100 using around 6% interest rate projections.  

Over 30 years, Harold’s total premium payments (contributions) of $720,000 have grown to over $2,000,000, and he can expect an annual tax-free income of over $200,000! And just as exciting, Harold’s death benefit for surviving loved ones would be around $3 million, which is also paid tax-free to his beneficiaries.

It’s also important to compare if Harold decides to wait ten years before pulling the trigger without increasing his monthly outlay in his LIRP.  

Sample Tax-Free Retirement Plan for a 45 year old male

North AmericanAllianzNational Life
Contribution Amount$2000 per month$2000 per month$2000 per month
Starting Death Benefit$600,000$600,000$600,000
Death Benefit at age 65$1,534,000$1,422,000$1,416,000
Cash Accumulation value at age 65$934,000$822,000$816,000
Annual Tax-Free Income at age 65$107,000$72,000$68,000
IRR at age 659.58%9.05%8.63%
Illustrated Rate based on historical returns6.24%6%5.73%
The table above assumes that $2,000 per month is contributed to age 65 then taking monthly income from age 66 to age 100 using around 6% interest rate projections.

This table clearly illustrates how important it is to set up your LIRP as soon as practical. In Harold’s case, waiting ten years to pull the trigger and not increasing his monthly contribution will cost him about $100,000 per year in tax-free income and reduce the death benefit to his beneficiaries by about $1.5 million.

Now, let’s change our hypothetical a bit and have Harold coming into the office at age 55 but still willing to contribute $2,000 per month and still wanting to retire at 65

Sample Tax-Free Retirement Plan for a 55 year old

North AmericanAllianzNational Life
Monthly Contribution$2000 per month$2000 per month$2000 per month
Starting Death Benefit$400,000$400,000$400,000
Death Benefit at age 65$691,000$661,000$684,000
Cash Accumulation value at age 65$291,000$261,000$284,000
Annual Tax-Free Income at age 65$31,000$22,000$21,000
IRR at age 6514.36%15.25%15.29%
Illustrated Rate based on historical returns6.24%6%5.73%
The table above assumes that $2,000 per month is contributed to age 65 then taking monthly income from age 66 to age 100 using around 6% interest rate projections.

Even with only ten years to invest before retiring, Harold’s $24,000 annual contribution grows to approximately $300,000 at age 65 and will provide a tax-free income of around $30,000 per year and a tax-free death benefit of almost $700,000.

LIRP infographic


Final Thoughts on Planning Your LIRP

As we said earlier, when choosing life insurance to serve as a retirement income tool, there are a few key points that you’ll want to consider.

A LIRP is a long-term play.

You will typically need at least ten years for your accumulation period, but we have set some LIRPs up with shorter timeframes. The more time you have, the better.

You will need to make sure the policy is structured to maximize growth and minimize expenses.    If you contribute too much, your policy could become a modified endowment contract or MEC. MECs are life insurance policies with too few death benefits to support the premiums being paid.

We don’t allow this to happen. We will direct the carrier to return funds to the policy owner over the maximum allowed, keeping them safe from becoming an MEC.

How to Get Started with Your LIRP Today

Ready to take control of your financial future with a Life Insurance Retirement Plan? Our advisors are here to guide you every step of the way. From choosing the right policy to structuring it for maximum benefits, we ensure that your LIRP aligns perfectly with your retirement goals. Don’t let another day go by without exploring the LIRP option.

We can advise you throughout the LIRP process and review each year to ensure you keep on track with your goals.

You have to consider which carrier will work best for your situation. This depends on your personal funding level, health status, and future retirement income needs and goals.

IUL can be a great retirement income planning vehicle for most age groups.

Contact us now for a personalized consultation so that we can design a plan around your financial goals. Start building your LIRP with us today! Call us or use the IUL calculator on this page.

We are Here to Guide you
We know LIRPs and want to advise you. If you would like a personalized proposal, you can call us at 1-800-712-8519. 


LIRP FAQs: Answering Your Common Questions

Why use a LIRP?

As a result of government spending, many Americans are turning to tax-free accumulation tools as a way to protect their assets for retirement from the impact due to rising taxes, inflation in the economy and investment risk in the stock market. A LIRP is a great tool for minimizing tax liability.

Are there Fees charged when you have a LIRP?

There are fees associated with any type of retirement plans. But since the LIRP is built using Indexed Universal Life Insurance, the fees have a lesser impact on your cash account than with traditional retirement products.

Are there contribution restrictions on a LIRP?

No, there are no limits on contributions.

Which type of life insurance should I use in my LIRP?

The best type of life insurance to use in your LIRP is typically Indexed Universal Life Insurance. This is because your policy’s cash account will grow based on what is happening in the markets but not lose when the market is down

author avatar
Doug Mitchell, CLU Independant Advisor
Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent almost 30 years in the life insurance industry and has also held licenses to sell securities, long-term care insurance and home and auto insurance. Doug is a Top of the Table Million Dollar Round Table member (MDRT).  MDRT is a global, independent association of the world's leading life insurance advisors.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table. He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award. Later in his career with New York Life he was an Executive Council Member. Doug currently serves as President of Ogletree Financial, a managing general agency serving life insurance agents and clients in all parts of the United States. Today, Doug’s main focus is servicing 1000s of policyholders and growing the agency through the reach of