Speak to a Licensed Sales Agent!
Explore Life Insurance Retirement Plans
Life insurance retirement plans are permanent life insurance policies that can be used to help fund your retirement. See what kind of life insurance is right for you with SelectQuote.
Life Insurance Retirement Plan (LIRP)
There are plenty of financial tools to consider as you begin to plan for retirement. You’ll want to prepare for changes in your health insurance coverage, streamline your budget to account for a fixed income, and save to help provide for your financial goals. But there’s still one tool you may not have considered as a key part of retirement planning: life insurance retirement plan (LIRP).In addition to IRAs, 401(k) plans, and pensions, did you know that permanent life insurance, universal life insurance, and whole life insurance can often be useful components of an estate planning strategy? If you’re a high-net-worth individual, you should be aware of how a life insurance retirement plan (LIRP) can factor into your future financial planning strategy.
What is a LIRP?
A Life Insurance Retirement Plan (LIRP) is a type of permanent life insurance policy that can be used as a financial tool to help policyholders save for retirement. Unlike traditional retirement plans such as Individual Retirement Accounts (IRAs) or 401(k)s, LIRPs provide the dual benefit of life insurance coverage and a cash value component. As with other permanent life insurance policies, the cash value of a LIRP grows over time depending on the terms outlined in the policy.Policyholders have the option to overfund the policy by paying more than the required premiums, which helps to build up the cash value at a faster rate. One of the advantages of a LIRP is that it can benefit policyholders who have already maxed out their contributions to traditional retirement plans, like IRAs.
How can you use a LIRP to fund retirement?
One valuable life insurance retirement plan benefit is you can use the cash value of a policy to supplement your retirement income and offset any taxable income to stay in a low-to-zero income tax bracket. For many retirees on fixed income, maximizing the amount of money you have can go a long way toward maintaining your standard of living. Reducing your taxable income is one way to do so. Note that LIRP investments—like other retirement funds—are subject to capital gains tax.
What is the difference between a life insurance retirement plan and a 401(k) or IRA?
You shouldn’t count on a LIRP as your primary mode of retirement funding. Dedicated retirement investment accounts, such as 401(k) accounts or IRAs are often a better option. Cash value insurance doesn’t possess the same investment opportunities and offers relatively low rates of return compared to these plans:
- A 401(k) plan is often offered to employees as part of an overall benefits package. Employers can and often choose to match contributions to a 401(k) up to a certain percentage. Most 401(k) investments are tax-deferred and are therefore taxed upon withdrawal, usually in retirement.
- IRAs are retirement savings plans that you open and fund without contribution from your employer. The investments are made with after-tax contributions, meaning you pay no taxes if you withdraw them after you turn 59 ½.
Benefits and Drawbacks of a Life Insurance Retirement Plan
LIRPs can serve as an additional savings vehicle to help you meet significant financial goals during retirement and may be a good fit if you have financial dependents who want to provide for their loved ones in the event of their passing. However, it's important to consider the potential drawbacks of a LIRP. For example, if you take loans against the cash value of the policy, they will accrue interest, which can reduce the overall value of the policy. This means that if the loan is not repaid, the outstanding balance may be deducted from the policy's death benefits. Here’s a closer look at some of the benefits and drawbacks of LIRPs.
| Benefits of LIRPs | Drawbacks to LIRPs |
| Guaranteed death benefit | Expensive premiums |
| No contribution limit | Lower investment returns than other retirement plans, such as 401(k) and IRA |
| Penalty-free access to cash value (if borrowing) that can supplement income without impacting your tax bracket | Fees for withdrawals depending on how long you’ve had your policy |
| Guaranteed minimum | No tax-deductible contributions |
| Tax-deferred cash value | Cash value loans accrue interest until repaid. The loan and its interest are deducted from the death benefit when you die. |
| Long-term care rider options |
Who should buy a life insurance retirement plan (LIRP)?
A LIRP is typically beneficial for high-net-worth individuals and those with complex financial needs. If you fall into one of these categories, LIRPs, such as whole life and universal life policies, can be used as part of a retirement plan to supplement retirement savings. However, it’s important to consider the potential drawbacks and consult a financial advisor for your personalized retirement planning. Here’s an overview of the types of policyholders who may benefit from buying a LIRP.
- High-income earners who are looking for other options for additional retirement savings after maxing out contributions to 401(k)s or IRAs.
- High-net-worth individuals with complex estates may find a LIRP appealing due to how its death benefits work. In most cases, the death benefit from a life insurance retirement plan can be used to pay estate taxes and therefore preserve the majority of your estate for your beneficiaries.
- Parents of a special needs child or dependent may want to consider a life insurance retirement plan, especially if their dependent will require care after their death. The death benefit and cash value will provide the necessary funds to support your child/children upon the death of the insured.
Shop Life Insurance Retirement Plans with SelectQuote
As you approach retirement, you may have questions about life insurance policy length, cost, and coverage. Whether you think a life insurance retirement plan could be a significant part of your retirement or you’re simply shopping for term life insurance coverage to provide a financial safeguard for your family, SelectQuote can help you decide on the right life insurance coverage to meet your needs. Our licensed insurance agents will compare rates from several of the nation’s most trusted insurance carriers in just minutes to make it easy for you to find the right policy for your goals, lifestyle, and budget.
Licensed name varies by state: SelectQuote Insurance Services, SelectQuote Insurance Agency. ©2025 SelectQuote Insurance Services. All rights reserved.