Download Life Insurance Retirement Plan (LIRP)

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ADVANCED PLANNING STRATEGY
Life Insurance Retirement Plan (LIRP)
``
Tax Efficiency Before, During, and After Retirement
A Life Insurance Retirement Plan (LIRP) can be an ideal solution for highly compensated/high-net-worth clients seeking to
drive additional retirement income on a tax favored basis. The LIRP provides many of the same tax-free characteristics of a
Roth IRA, coupled with powerful additional benefits. Most Fortune 500 companies provide their senior executives with a
retirement plan that contains the exact same investment vehicle as the LIRP. These are powerful plans and there is no
reason a client cannot create one of these plans on their own.
PLAN FEATURES
 No contribution limits. This can be a great solution for individuals who need to reposition highly taxable assets into
tax-free accounts but are limited by the contribution limits of the Roth IRA
 Plan assets grow tax-deferred through one’s lifetime
 The owner can structure tax-free distributions from their Plan*
 No income limits. There are no earned income phase-out limits, meaning high income individuals can employ this
strategy and contribute as much as they desire to their Plan
 Upon death, the Plan will provide income tax-free proceeds to beneficiaries
 No RMD requirements nor contribution limits
 The LIRP, depending on the state, may also offer substantial creditor protection
CLIENT SNAPSHOT
IS A LIRP RIGHT FOR MY CLIENT
This may be an appropriate option for clients who:
 Can contribute at least $25-$30K/yr to their Plan (most
clients contribute far more)
 Are insurable
 Have fully funded all other qualified retirement options
 Would like to put away additional tax-advantaged dollars for
retirement once they have reached the contribution limits on
qualified plans
 Will not need distributions for at least 10 years
Age
35 - 60
Financial
Situation
Highly compensated,
High-net-worth
Status
Fully funded all other
qualified retirement plans
Concern
Would like additional
options for supplementing
retirement savings
*Withdrawals and loans can reduce the policy death benefit and cash surrender value and may cause the policy to lapse. Lapse of a life insurance
policy can cause the loss of the death benefit and potential adverse income tax consequences. X
All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing company. Policy guarantees and benefits are
not back by the broker/dealer and/or insurance general agency selling the policy, or by any of their affiliates. The product and some features of the
product may vary by state or may not be available in all states.
INVESTMENTS AND INSURANCE PRODUCTS:
FOR FINANCIAL ADVISOR USE ONLY.
NOT FDIC INSURED
NO BANK GUARANTEE
MAY LOSE VALUE
Vers 9/16/2015
877.842.1212
Emercury.com
Life Insurance Retirement Plan (LIRP)
HOW A LIRP WORKS
Technically,
of of
plan
utilizes
a specific
type type
of lifeof
insurance.
But theBut
insurance
component is minimized to the
Technically,this
thistype
type
plan
utilizes
a specific
life insurance.
the insurance
smallest
amount
allowed
by
law.
By
doing
so,
a
client
receives
the
attractive
tax
advantages
the insurance offers, i.e., tax
component is minimized to the smallest amount allowed by law. By doing so, a client
deferred
growth
and
potential
tax-free
income,
without
the
expense
of
insurance.
No
other
asset class offers these tax
receives the attractive tax advantages the insurance offers, i.e. tax deferred growth and
advantages.
Pre-retirement,
plan will
income
tax-free death
benefit
protection.
Post-retirement, the potential
potential tax
free income, the
without
theprovide
expense
of insurance.
No other
asset
class offers
policy cash value can be used to supplement retirement income.
these tax advantages. Pre-retirement, the plan will provide income tax-free death
benefit protection.
Post-retirement,
the potential policy cash value can be used to
OVERVIEW
OF FINANCIAL
ALTERNATIVES
supplement retirement income.
This table shows a comparison of the benefits of life insurance in a LIRP plan and three hypothetical financial alternatives.
Non-Qualified
*Withdrawals and loans can reduce the policy death benefit
and cash surrender
value and Qualified
may
Brokerage
Summary
of of
Benefits
Deferred
Retirement
cause the policy to lapse.
Lapse
a life insurance policy can
cause
the
loss
of
the
death
benefit
Account
Annuity
Plan
and potential adverse income tax consequences.
Tax deductible contributions/premium payments
X
Income tax deferred growth of values
Cash values free from creditors (varies by state)
Not subject to IRS contribution limits
Personal
Retirement
Plan
X
X
X
X
X
X
X
X
X
No Required Minimum Distributions at age 70 /2
X
X
X
1
X
1
No 10% penalty for distributions prior to age 59 /2
X
Distributions during lifetime not taxable as income
X**
Favored estate tax treatment, if structured properly
X
Income tax-free at death*
CONTRIBUTION COMPARISON
X
X
Total After-Tax Distributions
The graph to the right illustrates how
purchasing life insurance in a LIRP compares
to contributing the same amount of money
into other types of accounts or plans.
Amounts shown reflect the tax impacts on
each alternative.
Contribution amount:
Male, 45
Preferred
Non-tobacco
$50,000.00/yr.
20 Years
Hypothetical assumption: tax rate is illustrated at 35% for all years. Gross annual return for all
accounts is calculated at 6.00%. The values illustrated are not guaranteed.
*Proceeds from an insurance policy are generally income tax-free and, if properly structured, may also be free from estate tax. The brokerage
account under current law could be income tax free at death due to the stepped up basis.
**A portion of the policy’s surrender value may be available as a source of supplemental income through policy loans and withdrawals.
XX
These materials are not intended to and cannot be used to avoid tax penalties. They were prepared to support the promotion or marketing of the
material addressed in this document. Withdrawals and loans can reduce the policy death benefit and cash surrender value and may cause the policy
to lapse. Lapse of a life insurance policy can cause the loss of the death benefit and potential adverse income tax consequences.
Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel regarding such matters.
FOR FINANCIAL ADVISOR USE ONLY.