Life Insurance Retirement Plan (LIRP): A Tax-Free Retirement

Shawn Plummer

CEO, The Annuity Expert

What is a Life Insurance Retirement Plan (LIRP)?


A Life Insurance Retirement Plan (LIRP) is a financial strategy that combines life insurance with retirement savings. It involves using a permanent life insurance policy, such as whole life or universal life, to build cash value over time. This cash value can then be used as a tax-advantaged retirement income source.

How Does It Work?

  1. Policy Selection: Choose a permanent life insurance policy.
  2. Premium Payments: Pay premiums, part of which goes towards the death benefit and part into a cash value account.
  3. Cash Value Growth: The cash value grows tax-deferred, based on interest rates or investment returns.
  4. Retirement Income: During retirement, you can withdraw or borrow against the cash value, often tax-free.


  • Whole Life Insurance: Offers fixed premiums and guaranteed cash value growth.
  • Universal Life Insurance: Provides flexible premiums and adjustable death benefits, with cash value growth tied to a specific interest rate or market index.
Lirp Insurance

Benefits and Drawbacks


  1. Tax Advantages: Tax-deferred growth and tax-free withdrawals.
  2. Death Benefit: Financial protection for beneficiaries.
  3. Flexible Access: Ability to borrow against cash value.


  1. High Premiums: Typically more expensive than term life insurance.
  2. Complexity: Can be complex and require careful management.
  3. Investment Risk: Some policies have cash value tied to market performance, introducing risk.

Who Should Consider a LIRP?

  • High-Income Earners: Those who have maxed out other tax-advantaged retirement accounts.
  • Seeking Tax Benefits: Individuals looking for additional tax-free income during retirement.
  • Need for Life Insurance: Those who also have a need for a permanent life insurance policy.

Comparing LIRP to Other Retirement Plans

Tax TreatmentTax-deferred growth, tax-free withdrawalsTax-deferred growth, taxed withdrawalsTax-deferred or Roth options
Investment OptionsBased on life insurance policyVaries by planWide range
Contribution LimitsBased on policy$23,000 (2023)$7,000 (2023)
Early Withdrawal RulesLoans against cash valuePenalties and taxesPenalties and taxes
Life Insurance Retirement Plan


A Life Insurance Retirement Plan offers a unique combination of life insurance protection and retirement savings, with notable tax advantages. It’s particularly beneficial for high-income earners who seek additional tax-free retirement income and those who need life insurance coverage. It’s important to weigh the benefits against the costs and complexities. For personalized advice on whether a LIRP is right for you, contact us today for a free quote.

Life Insurance Inquiry

Frequently Asked Questions

What is the best life insurance retirement plan?

Whole life insurance and indexed universal life insurance are the best life insurance retirement plans because of their savings component, called cash value.

Related Reading

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

Scroll to Top