Anybody ever take a look at a LIRP? Life Insurance Retirement Plan. I'm just beginning to scratch the surface of learning about LIRPs. In a nutshell, LIRPs are overfunded whole life insurance products that can pay out a tax free benefit from accumulated investment principal. Essentially, one places way more than the amount required to cover death benefit premiums into an account labeled "life insurance." You own it, it participates market performance. I know, I know conventional wisdom says if you want life insurance, buy term to get the benefit you need and stay away from expense-laden whole life products. In the case of a LIRP, the death benefit is a secondary purpose. Because LIRPs are a life insurance product, amounts withdrawn are tax free. As I learn about LIRPs, it's clear that the primary purpose would be a retirement income vehicle, with an ancillary life insurance benefit and possibly long-term care benefits as well. Some plans have market downside protections, while participating in market gains. Like any financial product, LIRPs can be complex and laden with costs, but there are good ones and some dogs. Most Fortune 500 executives have LIRPs as part of their compensation package. It's easy to find negative talk about LIRPs on the Internet. They are not a main-stream financial product, but some pretty sharp people have insisted on having them in their overall retirement package. An individual can self-fund a LIRP, but I'm wondering if there is a means for us to pursue such a plan as a company-provided benefit.
Here's some very ballpark figures based on rough memory of some reading I cannot refer back to at the moment. An individual who's 55 intending to retire in ten years could invest about $70k per year for 10 years, and in the end could expect to draw about $70K per year tax-free until age 95. That tax free income stream could have a positive impact on overall tax reduction vs similar amounts coming out of a 401K (more favorable "provisional income" calculations that might net a greater social security benefit). The account would have a cash accumulation that varies throughout the retirement period, but it would clearly be a significant nest egg to leave behind. A variable death benefit would range from $500K to $800k throughout the life of the contract. If one had the misfortune of dying shortly after retiring, I recall something like $750,000 in account principal and $800,000 in life insurance. So at a some points in the actuarial progression, there's an amount lurking around 2x total investment available to your heirs, but while alive you are collecting something on the order of 10% annual ROI and it's tax fee. That's just one vague illustration based on one quote from a life insurance broker. All figures mentioned above might not be recalled with 100% accuracy, but the point is, I think it's worth looking at.
I'm up for studying LIRPs quite a bit more. Like a 401K, LIRPs are in the name of the owner, not attached to the fortune of one's employer.