A life insurance retirement plan (LIRP) is a type of permanent life insurance policy, so its cash value component can help supplement retirement funds. When you pay your premiums for the plan, part of that payment is put into a savings account—the cash value. This amount then grows over time. You can then withdraw or borrow against the cash value to help pay for retirement.A LIRP can be a good option for parents of special needs children or dependents because the death benefit and cash value can support their dependent’s ongoing care after they pass away. In this article, we’ll help you understand more about what a LIRP is and how it works, the pros and cons of this plan type and why it makes sense for people with special needs dependents.
Why a LIRP Makes Sense for Parents of Children With Special Needs
Life insurance is a way to provide financial security for your dependents if you pass away. Since special needs children and dependents have complex needs and expenses related to ongoing care, the value of a LIRP’s death benefit coupled with the cash value component can ensure extra financial security toward expenses like caregiving, medical needs, residential costs and more if you pass away.You can also use these benefits while you’re still alive: if you’re retired and are on a fixed income, borrowing against or withdrawing from the cash value of a LIRP can help provide financially for your dependent with special needs without impacting your tax bracket.
What are the pros and cons of a LIRP?
Keep in mind that while a LIRP can supplement your retirement, it shouldn’t be your only retirement account. Like any other life insurance plan, there are both pros and cons of a LIRP.Pros of a LIRP
The benefits are tax-deferred
There’s no contribution limit, so you can let the account accumulate as much as you wish
Access to the cash value is penalty-free if you are borrowing from the funds
LIRP accounts have a guaranteed minimum, meaning you’ll never have financial loss on your investment
Cons of a LIRP
Premiums may be expensive
Loans borrowed against your cash value will accrue interest, so the amount of the loan and the interest will be deducted from your death benefit
You may have fees for withdrawals depending on how old your policy is
Investment returns are typically lower than other retirement plans
Considering a Life Insurance Retirement Plan? Let SelectQuote help.
A life insurance retirement plan can offer a financial safety net for your loved ones with special needs. At SelectQuote, we have 35+ years of expertise to help you find the right life insurance policy that makes the most sense for you. We search trusted carriers quickly and easily, saving you time and finding you coverage to keep your loved ones protected. And we do it all in just minutes. At SelectQuote, we shop while you save.
