No Penalties Pre-59 ½: Unlike retirement accounts like 401(k)sor IRAs, there is no 10% penalty if you take money out of yourLIRP before you reach age 59 ½.
No 1099s: The money within your LIRP’s accumulation account doesn’t get taxed as it grows like a mutual fund or a CD. This alone can save you thousands of dollars in unnecessary taxes over the course of your retirement.
Distributions Are Not Reportable Income: Remember, if you take money out of your LIRP in the right way, it doesn’t show upon the IRS’s radar as reportable income. In short, distributions are tax-free! Furthermore, it doesn’t count as provisional income which could otherwise cause your Social Security to be taxed.
No Contribution Limits: Unlike the Roth IRA, the LIRP has no contribution limits. The IRS only stipulates that the amount of your contributions be tied to your death benefit. I have clients that contribute $50 a month to their LIRPs, and I have clients that contribute $200,000 per year, and everywhere in between. The money within your LIRP’s accumulation account doesn’t get taxed as it grows like a mutual fund or a CD. This alone can save you thousands of dollars in unnecessary taxes over the course of your retirement.
